Ethereum’s all-time high depends on Bitcoin

The price of Ether (ETH) is behind the price action of Bitcoin (BTC) by 13 percent in October, but is there a correlation between the two? To date, the altcoin has still outperformed BTC by 274 percent in 2021. However, traders tend to take short positions. Many investors are skeptical whether the Ethereum network can successfully migrate to the proof-of-stake (PoS) algorithm and ultimately solve the high gas fees.

Bitcoin and Ether prices on the Bitstamp exchange. Source: TradingView

Additionally, increasing competition with smart contract networks such as Solana (SOL) and Avalanche (AVAX) worries investors:

As Cointelegraph noted, recent speculation about the possible approval of a Bitcoin exchange-traded fund (ETF) has fueled investor appetite for BTC. The US Securities and Exchange Commission (SEC) is expected to announce its decision on multiple ETF applications in the coming weeks. But the possibility remains that the regulator will delay these dates.

Professional traders unaffected by the recent price recession

Professional traders should analyze the futures premium, also known as the base rate, to determine if it is bearish. This indicator measures the price difference between the prices of futures contracts and the regular spot market.

Quarterly Ether futures are among the whales’ preferred instruments and trading desks. These derivatives may seem complicated to individual investors due to the swap history and price difference in the spot markets, but one of their most important advantages lies in the fact that they do not contain floating financing rates.

Ether futures quarterly base rate. Source: Laevitas.ch

Quarterly futures generally trade at an annual premium of 5 to 15 percent and follow the loan rate of the stablecoin. Sellers delay settlement, demanding a higher price, causing the price difference.

As shown above, the failure of Ether to break the $ 3,600 resistance did not change the mood for professional traders, as the base rate remains at a healthy 13 percent. This shows that there is no excessive optimism at the moment.

Retail traders have been neutral for the past five weeks

Retail traders tend to go for perpetual contracts (reverse swaps), which are charged every eight hours to offset the demand for leverage. It is important to analyze the funding rate of the futures markets to understand if there is a panic sale.

8-hour Ether perpetual futures funding rate. Source: Bybt

In neutral markets, the funding rate tends to range from 0 to 0.03 percent on the positive side. This fee is equal to 0.6 percent per week and this amount is paid for long positions.

Since September 7, there have been no signs of high demand for leverage from the bulls or bears. This stable situation reflects individual investors’ appetite for leveraged long positions, but also indicates little panic selling or extreme fear.

Derivatives markets show that Ether investors are not concerned about the recent poor performance against Bitcoin. In addition, the lack of excessively long leverage is positively reflected in the market after the 274 percent gain so far this year.

Ether investors appear keen to rally above their all-time high, especially if the Bitcoin ETF passes, which leaves some room for optimism without sacrificing derivatives market data.

The opinions and comments expressed in this document are solely to the author belongs. It may not reflect the views of Cointelegraph. All investment and trading involves risk. You should do your own research when making a decision.

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