Ethereum derivative data show that pro traders are bearish, but for how long?

Ether (ETH) lost the critical $ 3,000 psychological support level on April 11 after a 16% weekly negative performance. Bulls were finally caught by surprise as $ 104 million in leveraged long futures were liquidated on April 11. Ether’s decline also followed a decline in total value locked (TVL) in Ethereum smart contracts.

Ethereum network TVL in ETH. Source: Defi Llama

The metric peak at 40.6 million Ether on Jan. 27, and has since fallen by 22%. This indicator could partly explain why Ether could not tolerate the contraction due to Bitcoin’s (BTC) 13% weekly negative movement.

However, the leading altcoin has its own catalysts, as Ethereum developers implemented the network’s first “shadow fork” on April 11th. – stake.

More importantly, one needs to analyze how professional traders position themselves and there is no better measure than derivatives markets.

The futures premium is back to bearish levels

To understand whether the current bearish trend reflects top traders’ sentiment, one must analyze Ether’s futures contracts premium, also known as a “base.” Unlike a perpetual contract, these fixed-calendar futures have no financing rate, so their price will differ greatly from regular spot exchanges.

A trader can measure market sentiment by measuring the cost gap between futures and the regular spot market. A neutral market should present a 5% to 12% annual premium (base) because sellers are asking for more money to keep settlement longer.

Ether 3-month futures premium. Source: laevitas.ch

The chart above shows that Ether’s futures premium stood above the 5% neutral threshold between March 25 and April 6, but later weakened to 3%. This level is typically associated with fear or pessimism, as futures market traders are reluctant to open leveraged long (buy) positions.

Long to short data confirm decorative conditions

The long-to-short net ratio of the top traders excludes externalities that may have affected the future instruments in the long run. By analyzing these on-the-spot whale positions, perpetual and futures contracts, one can better understand whether professionals are effectively becoming bearish.

Stock market’s top traders Ether long-to-short ratio. Source: Coinglass

First, one has to note the methodological differences between different exchanges, so that the absolute figures are less important. However, since April 5, there has been a significant decline in the long-to-short ratio of any major derivative exchange.

Data signals that whales have increased their bearish bet over the past week. For example, the Binance whales maintained a 1.05 long-to-short ratio on April 5, but gradually decreased to 0.88. Furthermore, the OKX top traders moved from a 2.11 favorite longs to the current 1.35.

Related: Kava becomes bullish as Ethereum Co-Chain launches initial push to EVM compatibility

Are investors and users leaving the network?

From the perspective of the metrics discussed above, there may not be an indicator that points to extreme bearishness, but the base rates of futures and the long-to-short ratio of the top traders have been lower over the past week words.

Furthermore, the TVL in Ethereum smart contracts signals a decline in usage. The constant delays in proof-of-stake migration can distract investors and drive decentralized finance (DeFi), gaming, and nonfungible (NFT) projects to competing networks. In turn, traders have turned their attention to more promising altcoins and thereby reduced the demand for Ether.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You have to do your own research when making a decision.