Ethereum traders reduce their bullish bets as ETH struggles reclaim $3K
Ether (ETH) is still in troubled waters after failing to break a five-week-long descending channel top for the third time in a row. The March 2 test of the $3,000 resistance was followed by a 17.5% correction in five days, which signals that buyers are somewhat reluctant to defend the price.
To date, Ether suffers from high network transaction fees, even though it dropped from $19 in mid-February to the current $13 per transaction. While this is less than peaks seen previously, $13 per transaction is still incompatible with most games, nonfungible token and even decentralized finance transactions.
Even more worrisome than Ether's performance has been the total value locked (TVL) in Ethereum declining by 55% on March 8. Data shows the percentage of assets locked in its smart contracts reached an all-time low versus competitors.
This indicator could partially explain why Ether has been in a down-trend since early February. But, more importantly, one needs to analyze how professional traders are positioning themselves and there's no better gauge than derivatives markets.
To understand whether the current bearish trend reflects top traders' sentiment, one should analyze Ether’s futures contracts premium, which is also known as a "basis." Unlike a perpetual contract, these fixed-calendar futures do not have a funding rate, so their price will differ vastly from regular spot exchanges.
By measuring the expense gap between futures and the regular spot market, a trader can gauge the level of bullishness in the market. Conversely, bearish sentiment tends to cause the three-month futures contract to trade at a 5% or lower annualized premium (basis).
On the other hand, a neutral market should present a 5% to 15% basis, reflecting market
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