On-Chain Analytics Platform Warns of Bearish Signals for Ethereum

As the cryptocurrency market continues to evolve, investors and traders are keeping a close eye on the performance of Ethereum, the second-largest cryptocurrency by market capitalization. According to CryptoQuant, a popular on-chain analytics platform, Ethereum is currently experiencing a bearish guard ahead of the upcoming Shanghai update.

A closer look at Ethereum’s technical and on-chain charts reveals some worrying signs for investors. In the technical charts, Ethereum is currently below the 50-week moving average resistance, and there are negative divergences in the RSI, MACD, and Wave Trend indicators. This could indicate a bearish pre-signal, and if the support level of $1,460 is broken, it could trigger a significant price drop.

Source: CryptoQuant

On the on-chain front, the bearish guard of whales can be seen as the ratio of outflow to inflow of whales (top 10) has decreased significantly. Additionally, exchanges have also reduced their Ethereum supply based on the ETH Exchange Supply Ratio, which usually increases significantly in the accumulation phase. These indicators suggest that large investors and exchanges are currently bearish on Ethereum.

The derivatives market sentiment is also bearish, as the ratio of sellers to buyers has a significant advantage, and the open interest has increased relatively. This indicates that derivatives traders are also bearish on Ethereum, which could exacerbate the downward pressure on the cryptocurrency.

ETH Derivatives Indicate Reduced Demand for Long Positions

According to Laevitas, the demand for long positions in ETH derivatives has decreased. Typically, a healthy market would see an annualized three-month futures premium of 5% to 10%. However, the current premium has dropped to 3.1%, indicating a lack of confidence from traders and a bearish sentiment.

Laevitas shows the annualized premium for Ether 3-month futures.

However, a decline in demand for leverage longs doesn’t necessarily predict adverse price action. To understand future price movements, traders should analyze Ether’s options markets and how market makers are pricing the odds.

The 25% delta skew indicator is particularly telling. In bear markets, options investors tend to give higher odds for a price dump, which causes the skew indicator to rise above 10%. In contrast, bullish markets tend to drive the skew metric below -10%, indicating that bearish put options are less in demand.

Laevitas shows the 25% delta skew for Ether 30-day options

The delta skew for Ether’s 30-day options moved above the bearish 10% threshold on March 4, indicating stress from professional traders. While there was a brief improvement on March 7, the metric continues to flirt with bearish expectations as options traders place higher costs on protective put options.

Overall, the options and futures markets suggest that pro traders are less inclined to add long positions, giving higher odds for $1,560 becoming a resistance level in the coming weeks. Investors will likely monitor the first couple of weeks following the Shanghai upgrade to measure its potential impact on ETH.

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