{"id":8782,"date":"2022-02-26T00:42:10","date_gmt":"2022-02-26T00:42:10","guid":{"rendered":"https:\/\/nftandcrypto-news.com\/crypto\/ethereum-futures-premium-hits-a-7-month-low-as-eth-tests-the-2400-support\/"},"modified":"2022-02-26T00:42:11","modified_gmt":"2022-02-26T00:42:11","slug":"ethereum-futures-premium-hits-a-7-month-low-as-eth-tests-the-2400-support","status":"publish","type":"post","link":"https:\/\/nftandcrypto-news.com\/crypto\/ethereum-futures-premium-hits-a-7-month-low-as-eth-tests-the-2400-support\/","title":{"rendered":"Ethereum futures premium hits a 7-month low as ETH tests the $2,400 support"},"content":{"rendered":"
\n

Ether (ETH) reached a $3,280 local high on Feb. 10, marking a 51.5% recovery from the $2,160 cycle low on Jan. 24. That price was the lowest in six months, and it partially explains why derivatives traders\u2019 main sentiment gauge plummeted to bearish levels.<\/p>\n

Ether\u2019s futures contract annualized premium, or basis, reached 2.5% on Feb. 25, reflecting bearishness despite the 11% rally to $2,700. The worsening conditions depict investors\u2019 doubts regarding the Ethereum network\u2019s shift to a proof-of-stake (PoS) mechanism.<\/p>\n

As reported by Cointelegraph, the much-anticipated sharding upgrade that will significantly boost processing capacity should come into effect in late 2022 or early 2023. <\/p>\n

Analyzing Ether\u2019s performance from a longer-term perspective provides a more appealing sentiment, as the cryptocurrency is currently 45% below its $4,870 all-time high.<\/p>\n

Furthermore, the Ethereum network\u2019s adjusted total value locked (TVL) has held a reasonable 42.8 million ETH despite the price correction.<\/p>\n

Ethereum network total value locked, in ETH. Source: DefiLlama<\/em><\/figcaption><\/figure>\n

As shown above, the network\u2019s TVL increased by 16.5% in three months, reflecting growth from decentralized finance (DeFi) and nonfungible token (NFT) marketplaces.<\/p>\n

However, due to network upgrade delays and worsening global macro conditions, professional traders are becoming frustrated and anxious, a sentiment that is depicted in multiple derivatives metrics.<\/p>\n

Ether futures hit their most bearish level in seven months<\/h2>\n

Retail traders usually avoid quarterly futures due to their fixed settlement date and price difference from spot markets. However, the contracts\u2019 biggest advantage is the lack of a fluctuating funding rate, hence the prevalence of arbitrage desks and professional traders.<\/p>\n

These fixed-month contracts usually trade at a slight premium to spot markets because sellers are requesting more money to withhold settlement longer. This situation is known technically as \u201ccontango\u201d and is not exclusive to crypto markets.<\/p>\n

Ether futures 3-month annualized premium. Source: Laevitas<\/em><\/figcaption><\/figure>\n

Futures should trade at a 5%\u201315% annualized premium in healthy markets. Yet, as displayed above, Ether\u2019s annualized premium has decreased from 20% on Oct. 21 to a meager 2.5%.<\/p>\n

Although the basis indicator remains positive, it has reached the lowest level in seven months. The crash to $2,300 on Feb. 24 caused bearish sentiment to prevail, and not even Feb. 25\u2019s 10% recovery was enough to flip the tables.<\/p>\n

Currently, data shows few signs that bulls are ready to regain control. If this were the case, the Ether futures premium would have turned positive after such a rally.<\/p>\n

The views and opinions expressed here are solely those of the <\/em>author<\/em><\/a> and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.<\/em><\/p>\n<\/div>\n