Ether (ETH) staged a surprising 8% rally on November 9, breaking through $2,000 and reaching its highest price in six months. This surge, sparked by news that BlackRock registered the iShares Ethereum Trust in Delaware, resulted in $48 million worth of ETH short futures liquidations. The first announcement was made by @SummersThings on a social network and later confirmed by Bloomberg ETF analysts.
The iShares Ethereum Trust was just registered in Delaware.
For comparison, BlackRock’s iShares Bitcoin Trust was similarly registered seven days before its ETF application was filed with the SEC. Details below.
[announcement: I’m moving to @SynopticCom soon] pic.twitter.com/IYafIaxMzA
– Summer (@SummersThings) November 9, 2023
The news fueled optimistic expectations about a possible filing of an Ether spot ETF by BlackRock, a $9 trillion asset manager. This speculation follows BlackRock’s iShares Bitcoin Trust registration in Delaware in June 2023, a week before its first spot Bitcoin ETF application. However, in the absence of an official statement from BlackRock, investors may have acted too hastily, although the asset manager’s sheer influence in traditional finance puts those betting against Ether’s success in a precarious position.
Professional traders placed bullish ETH bets using derivatives
To understand how professional traders are positioned after the surprise rally, one should analyze ETH derivatives metrics. Typically, Ether monthly futures trade at a 5-10% annual premium compared to spot markets, suggesting that sellers are demanding additional money to postpone settlement.
Ether 2-month futures premium. Source: Laevitas
The Ether futures premium jumped to 9.5% on November 9th, marking its highest level in over a year, and broke the neutral threshold of 5% on October 31st. This shift ended a two-month bearish streak and low demand for leveraged long positions.
To assess whether the break above $2,000 has caused excessive optimism, traders should examine the Ether options markets. When traders anticipate a decline in Bitcoin price, the delta 25 percent skew tends to rise above 7%, while during times of excitement it typically drops below minus 7%.
Ether 30 Day Options 25% Delta Skew. Source: Laevitas
Ether options’ 25% delta skew moved from neutral to bullish on October 31, and the current -13% skew is the lowest in over 12 months, but is far from overly optimistic. Such healthy levels have been the norm for the past 9 days, meaning Ether investors were expecting the bullish momentum.
There is little doubt that regardless of the spot ETF narrative, Ether bulls have gained the upper hand, as ETH gained 24% between October 18th and November 8th before the BlackRock news Top decentralized applications ( DApps) 30-day volume.
Ethereum network DApps volume rank. Source: DappRadar
Nevertheless, when analyzing the broader structure of the cryptocurrency market, especially retail indicators, there are some inconsistencies with the rising optimism and demand for leverage through Ether derivatives.
Related: Bitcoin ETF launch could be delayed by more than a month after SEC approval
Retail indicators suggest dormant demand for ETH and cryptocurrencies
First of all, Google searches for “Buy Ethereum,” “Buy ETH,” and “Buy Bitcoin” remained stagnant over the past week.
Search trend for buying Ether and cryptocurrency related terms. Source: Google Trends
One could argue that retail traders tend to lag behind bull runs, typically entering the cycle a few days or weeks after key price levels and a 6-month high are reached. However, demand for cryptocurrencies has declined if the stablecoin premium is used as a measure of Chinese crypto retailer activity.
The stablecoin premium measures the difference between China-based peer-to-peer USD Tether (USDT) transactions and the US dollar. Excessive buying demand tends to push the indicator above its 100% fair value, and in bearish markets, Tether’s market supply is flooded, resulting in a discount of 2% or more.
Tether (USDT) Peer-to-Peer vs USD/CNY. Source: OKX
Currently, the Tether premium on OKX is at 100.9%, indicating balanced demand from retail investors. Such a level, for example, contrasts with the 102% on October 13th, before the total cryptocurrency market capitalization increased by 30.6% through November 9th. Crypto conversion with stablecoins.
Essentially, Ether’s rally above $2,000 appears to have been fueled by derivatives markets and anticipation of spot ETF approval. The lack of retail demand is not necessarily an indicator of an impending correction. However, the hype surrounding BlackRock’s Ethereum Trust registry coupled with over-leveraged long positions in ETH derivatives is a cause for concern and is testing the $2,000 support level.
This article is for general information purposes and is not intended as, and should not be construed as, legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect the views and opinions of Cointelegraph.