On February. 20, Ether (ETH) toll rallied to a new loftier at $2,015, and this caused multiple indicators to display signs of excessive optimism. While the excitement could be easily justified by Ether'due south yr-to-engagement 176% gain, these warning signs should non be ignored.

One of the primary driving factors of the current bullish sentiment is the launch of CME ETH futures and Grayscale Investments' ETH trust reaching $6.3 billion avails under management. The decentralized finance phenomenon also continues, as there is currently more $21 billion worth of Ether locked in DeFi.

Crypto Fear & Greed Alphabetize. Source: Alternative.me

Currently, the Crypto Fear & Greed Index is at 93, indicating "Extreme Greed" according to its methodology. Many traders use the metric equally a counter-trading betoken — significant, the farthermost fear level tin be a sign that investors are bullish and a buying opportunity is present. In contrast, when investors are getting besides greedy, information technology could be a sign that the market place is due for a correction.

Unlike the excessively leveraged retail traders, the more experienced market makers and whales have been skeptical of the never-ending rally in Ether. Regardless of the rationale for the toll peak, the 36% cost correction that followed was accelerated past large liquidations.

Ether futures contracts aggregate liquidations. Source: Bybt

The liquidation of $2 billion in long futures contracts from Feb. xix to February. 23 represented 28% of the total open interest. Thus, one should expect significant deterioration in market place sentiment, as depicted on the previous Fear & Greed indicator.

Surprisingly, none of that happened on the Ether derivatives markets, as both the futures contracts premium (contango) and the options skew remained bullish.

The futures premium held very healthy levels

By measuring the expense gap between futures and the regular spot marketplace, a trader can gauge the level of bullishness in the marketplace.

The three-month futures usually trade with a ten% or higher premium versus regular spot exchanges. Whenever this indicator fades or turns negative, this is an alarming red flag. This state of affairs is known as "backwardation" and indicates that the market is turning bearish.

OKEx three-month ETH futures basis. Source: Skew

The above chart shows that the indicator peaked at 39% on Feb. twenty as Ether touched its all-fourth dimension loftier. Nonetheless, it has kept to a higher place 16% during the entire correction down to $1,300. This data shows that professional traders remained confident in Ether'south price potential.

The options skew remained neutral-to-bullish

When analyzing options, the 25% delta skew is the unmarried-most relevant gauge. This indicator compares similar phone call (purchase) and put (sell) options side-by-side.

It will plough negative when the put options premium is higher than like-risk call options. A negative skew translates to a college cost of downside protection and indicates bullishness.

The opposite holds when market makers are bearish, causing the 25% delta skew indicator to gain positive ground.

ETH options 25% delta skew. Source: Laevitas

Over the past calendar month, at that place hasn't been a unmarried incident of a sustainable positive delta skew. Therefore, in that location is no evidence that options traders demanded more significant premiums for downside protection.

This data is very encouraging, considering that Ether faced a heavy sell-off, simply the futures and options metrics discussed to a higher place held bullish levels during the downturn.

Every bit Ether managed to recover quickly from its contempo $1,300 dip, investors gained further conviction that the uptrend had not been broken.

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