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Be cautious of $1,820 support as Ethereum derivatives show signs of bearishness

Be cautious of $1,820 support as Ethereum derivatives show signs of bearishness

The Ether (ETH) price has returned to a tight range between $1,820 and $1,950 after briefly overshooting above $2,000 on May 6. Professional traders have been unwilling to add neutral-to-bullish positions using derivatives contracts, indicating a lack of confidence in the market. The weak derivatives indicators are more likely to flip bearish if the 3-week sideways movement breaks to the downside.

– Professional traders have been unwilling to add neutral-to-bullish positions using derivatives contracts, indicating a lack of confidence in the market.

– The increased gas fees have driven users to layer-2 solutions, which could be interpreted as a weakness.

– The demand for risk-on assets such as cryptocurrencies should remain under pressure with no signs of a Fed pivot on the horizon.

– ETH futures contracts in healthy markets should trade at a 5 to 10% annualized premium, but presently at 1.4%, the ETH futures premium reflects a complete lack of appetite from buyers using derivatives contracts.

– The ETH options’ 25% call-to-put delta skew has been neutral for the past two weeks, indicating a fair price relative to similar neutral-to-bullish call options.

– If Ether price breaks below $1,820, one should expect a much higher appetite for bearish bets using ETH derivatives, an indicator of distrust and a lack of demand for longs.