Derivatives data shows that traders are not as optimistic about ethereum compared to bitcoin. Although the cottage coin gained nearly 200% in the first half of 2021 compared to Bitcoin’s 22% gain, traders appear to be more susceptible to Ether’s recent underperformance.
Institutional flows have also impacted the declining optimism in the ethereum derivatives market, as ETH investment vehicles have suffered record outflows over the past week, while bitcoin flows have begun to stabilize. According to CoinShares, outflows from ethereum funds reached a record high of $50 million last week.
Price of Ether (orange) vs. Bitcoin (blue) Source: TradingView
It is worth noting that Ether performed 16% worse in June compared to Bitcoin. The London hard fork is reportedly planned for July, and its core proposal, dubbed EIP-1559, will limit Ether’s Gas fees. As a result, when the network migrates out of proof of work (PoW), price movements may be associated with unhappy miners.
Because of this, Ether investors have reason to worry, as uncertainties abound. They believe that perhaps miners supporting competing smart contract chains or other unexpected events could further negatively impact Ether prices.
Regardless of the rationale for the current price action, derivatives indicators now suggest traders are less confident in Ether compared to Bitcoin.
Ether December futures premiums show weakness
In a healthy market, quarterly futures should trade at a higher price than regular spot trades. The 4% to 8% premium in the December contract should more than compensate for this, in addition to the exchange risk, which the seller “locks in” by deferring settlement.
A similar effect occurs in almost every derivatives market, although cryptocurrencies tend to have higher risk and higher premiums. However, when futures prices fall below that range, it is an indication of short-term bearish sentiment.
OKEx BTC (blue) vs ETH (orange) December futures premium Source: TradingView
The chart above shows that the Bitcoin December futures premium rallied to 3.5%, while the Ether contract failed to follow. While both assets show neutral to bearish indicators, there is evidence that cottage coin investors are less optimistic about a near-term recovery.
Another decline will hurt cottage coins even more
Another argument that could negatively impact ethereum premiums is the impact of a potential 30% negative performance for bitcoin. Filbfilb, an independent market analyst and co-founder of the Decentrader trading suite, said a 30 percent plunge in bitcoin could prompt a twofold drop in cottage coins.
Clem Chambers, CEO of financial analysis site ADVFN, also predicted another possible drop that would repeat the crypto winter period of late 2018. chambers claimed bitcoin could capitulate and fall back to $20,000.
While overall market sentiment is neutral to bearish, it seems wise to predict a tougher scenario for ethereum, including the uncertainty surrounding the transition to proof of stake (POS).
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/ether-eip-1559-upgrade-on-the-horizon-but-derivatives-indicators-show-traders-are-not-bearish/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.