ETH Rally Loses Steam: Are Traders Losing Interest?
After more than doubling from $1400 to $2800 in April and May, Ethereum’s (ETH) Q2 surge has calmed off. Aggressive institutional demand, as evidenced by the May spike in U.S. spot ETH ETF net inflows to $564M, contributed to the robust recovery in early Q2. With just three trading days remaining in June, the inflows grew and surpassed $1 billion. Unfortunately, when ETH fluctuated between $2.8k and $2.3k, there was little speculative interest.
ETH Price Drops Despite $232M in ETF Inflows: What’s Going On?
Open Interest (OI) increased from $17 billion to $41 billion during the second quarter’s surge, which caused ETH to rise from $1.4k to $2.8k. This demonstrated a 2.4x increase in derivatives market demand.
However, the OI dropped by $10 billion, from $41 billion to $31 billion, since mid-June, indicating a reduction in demand. As anticipated, the price of ETH followed suit, falling from $2.8k to $2.1k before momentarily rising back to $2.4k at the time of writing. The enormous inflows seen in ETH ETFs were not reflected in this decline. Indeed, the ETF products brought in $232 million this week alone.
Ethereum Skew Drops Sharply: Is the Bullish Momentum Already Fading?
Earlier in the week, the 1-week (orange) and 1-month (cyan) tenors surged to 6% and 15%, respectively, based on the 25 Delta Skew indicator, highlighting the high demand for short-dated calls (bullish bets). This suggested that the relief bounce from $2.1k to $2.5k would be 18%.
The recent buying frenzy may have subsided, though, as the skew decreased to 1% and 3% for 1-week and 1-month tenors, respectively. The 3-month tenor, on the other hand, showed signs of bearish sentiment in Q3 by going negative and falling almost to -2%.
In other words, despite the short-term bullish view, futures traders have been concerned about ETH’s prospects in the medium run. However, the fact that ETH was in the buy zone was not negated by the conflicting assessments. According to the SOPR (Spent Output Profit Ratio), at least.
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