Ether Price May Experience Correction After Dencun Upgrade, QCP Capital Warns

Crypto News– Singapore-based digital assets trading firm QCP Capital has indicated in recent notes shared on its Telegram channel that Ether (ETH) prices may experience a potential correction. Despite this cautious stance, the trading firm remains cautiously optimistic about Ether’s long-term potential.

Ether Price May Experience Correction After Dencun Upgrade, QCP Capital Warns

Even as Ether has surged past $4,000, reaching its highest price in two years, QCP observes a shift in market sentiment characterized by negative risk reversals. These reversals, measuring the difference in implied volatility between call and put options, have turned negative, largely due to the perceived low probability of a spot Ether ETF being approved in the near future.

Historically, network upgrades like Bitcoin’s Taproot and the Ethereum merge have had minimal impact on pricing during bearish and sideways market conditions. However, with current market dynamics, there could be notable price reflexivity on Ethereum and its Layer 2 solutions. This could potentially be influenced by factors such as the already priced-in Dencun upgrade or a positive knee-jerk reaction, along with possible capital inflows into Layer 2 ecosystems, QCP analysts shared in a Telegram interview with CoinDesk.

Furthermore, a Polymarket prediction market contract only assigns a 31% chance of an Ether ETF being approved by May 31. Market data also indicates an uptick in demand for Ether put options as traders brace for short-term weakness. This is evident in the negative skew of one-month and 60-day call-put ratios, while longer-term sentiment remains positive.

QCP also expressed concern about the amount of leverage currently present in the market. However, they anticipate that traders will swiftly buy back any dips. Excessive leverage in the market has previously led to the May 2021 crash, where prices fell by 30% within 24 hours, as well as a 10% correction in Bitcoin’s price in January.

Despite these concerns, Ether has outperformed the CoinDesk 20 (CD20), which tracks the world’s largest and most liquid cryptocurrencies, boasting a 54% increase in the last month compared to CD20’s 50% rise.