Is $4,000 Ethereum a distant dream? Futures premium plunge to 3-week low

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Ether (ETH) has been trading below $3,750 for the past three days, despite the imminent launch of the coin’s spot exchange-traded funds (ETFs) in the United States. Some argue that the lack of bullish momentum for ETH is due to the lack of clarity on how long the individual S-1 fund filing approvals by the regulator could take. Regardless, Ether investors’ bullishness according to derivatives metrics has plunged to a 3-week low.

Regulatory uncertainy pressure on ETH price

But, even if the U.S. Securities and Exchange Commission (SEC) approves each of the filings from BlackRock, Fidelity, VanEck, and other firms this week, investors fear that the current market conditions do not favor demand for the Ethereum ETFs. Part of the lack of enthusiasm toward cryptocurrencies comes from regulatory uncertainty, but there’s also some concern on the macroeconomic side as the real estate market displays further signs of stress.

Coinbase, Binance, and Kraken are facing court actions for supposedly failing to register as brokers while offering securities investments. The U.S. SEC and the U.S. Department of Justice also charged crypto companies that included privacy tools such as Samourai Wallet and Tornado Cash. Furthermore, regulators claim that Ether staking services intermediation can be deemed securities, given that there is a promise of returns in exchange for the work of others.

Even if one assumes that there is no imminent event on the crypto regulatory front, investors are uncomfortable holding assets that are deemed riskier during a potential economic recession. Moody’s Ratings said on June 6 that at least six U.S. regional banks are at risk of having their debt ratings downgraded due to “meaningful concentrations in commercial real estate”, which is suffering due to higher interest rates.

The New York Times ran a story on May 24 regarding the Chinese housing market, where nearly four million apartments with no willing buyers are sitting empty. The article notes that government incentives to buy those properties using state-sponsored loans did not deter housing prices from crashing, and highlights that developers “still on the brink of default” are “intricately connected to local banks and the financial system”.

The less than favorable macroeconomic conditions explain why Bitcoin (BTC) failed to break above $71,000 on June 7, which in turn reduced Ether investors’ expectations regarding the potential spot Ethereum ETF inflows. The worsening sentiment becomes evident in ETH futures and options metrics, which moved to their most pessimistic point in more than three weeks.

Reduced confidence on Ether derivatives markets

Professional traders prefer monthly contracts due to the absence of a funding rate. In neutral markets, these instruments trade at a premium of 5% to 10% to account for their extended settlement period.

Ether 2-month futures premium relative to spot markets. Source: Laevitas.ch

Data reveals that the ETH futures premium dropped to 13% on June 10, down from 15% on June 6. While far from the bearish structure, this is the lowest level in more than three weeks. This is certainly not what one would expect given that some analysts claim that Ethereum ETFs could capture up to 20% of Bitcoin’s inflows on similar instruments.

Related: Ethereum leaders are stuck in a ‘massive contradiction’ — Wintermute CEO

Traders should also analyze options markets to gauge whether investors become less optimistic. If investors expect a Ether price drop, the 2-month delta skew metric will rise above 8%, and periods of excitement tend to result in a negative 8% skew.

Ether 2-month options delta skew. Source: Laevitas.ch

The ETH options 25% delta skew has last ventured at the bullish level on May 29, but the latest -6% level is fairly neutral and balanced, meaning whales and market makers are currently placing similar odds of positive and negative price swings for Ether’s price.

Given that Ether futures and options are signaling less bullishness despite the potential spot Ethereum ETF trading launch in the U.S., odds are ETH price is unlikely to break above $4,000 in the near term.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.