On May 15th, the crypto market saw a 5.5% increase in total market capitalization following the release of US inflation and retail sales data. However, Ether (ETH) failed to fully capitalize on this bullish momentum. Ether last closed above $3,000 more than five days ago, and has underperformed the leading cryptocurrency Bitcoin (BTC) by 22% since the start of 2024.
US macroeconomic indicators support gains in some rare assets
The crypto market reacted positively to April US Consumer Price Index (CPI) data showing a 3.4% year-on-year increase, in line with market expectations. However, April retail sales figures released on May 15 spooked investors as they showed stability from the previous month, contrary to economists' expectations of a 0.4% increase. This development raises the possibility that the US Federal Reserve (Fed) will implement economic stimulus measures.
Even if the U.S. Federal Reserve decides to keep interest rates above 5.25% for an extended period of time to control inflation, the central bank could purchase government bonds to increase the money supply or reduce the discount rate at which banks borrow from the central government. They may resort to actions such as lowering the rate. bank. Fundamentally, even a small continuous supply of liquidity can shape economic expectations and behavior.
Contrary to expectations, a downturn in economic activity is often seen as a sign that more money is being pumped into the system, benefiting investments in rare assets such as stocks, gold, and cryptocurrencies. Ultimately, the government will need to issue more bonds to fund these expansionary measures aimed at preventing recession. Over time, inflation can rise as additional money comes into circulation, regardless of interest rates.
Some analysts believe that the U.S. Securities and Exchange Commission's (SEC) May 23 decision on VanEck's Spot Ethereum ETF application is the main reason why Ethereum is unable to break above the $3,000 resistance level. are. The uncertainty surrounding this event causes traders to postpone investment decisions until the outcome is more certain, which is understandable. No matter how optimistic you are about Ethereum's long-term prospects, a rejection from the SEC could lead to a short-term market correction.
Eric Balciunas, senior ETF analyst at Bloomberg, said the Spot Ethereum ETF in 2024 is likely to grow in 2024, given regulators' cautious stance on products that may be classified as securities, especially those that include native staking services. expressed doubts about the approval. This skepticism is also evident in the Ether derivatives market.
Ether derivatives market reflects lack of optimism
To understand where professional traders stand, it is essential to investigate the ETH futures and options market. In neutral market conditions, the price of an Ether futures contract is typically set 5% to 10% higher than the regular spot price of ETH to account for the extended settlement period.
Ether futures premium (basis rate) is currently 9% and has remained stable for the past two weeks. This level indicates an overall lack of enthusiasm regarding spot ETF decisions, suggesting that sentiment among traders is neutral.
In the options market, the demand for call (buy) and put (sell) options is equal, and both types of instruments trade at similar price levels. Typically, when a trader expects the Ether price to decline, the 25% delta skew indicator will exceed 7%. Conversely, during periods of market excitement, negative skew is often 7%.
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If demand for bullish trades had increased in anticipation of the Spot Ethereum ETF decision, whales and market makers likely would have increased prices on contracts that provide upside protection. This likely reflects expectations of future price increases and an intention to take advantage of traders' willingness to pay more for potential profits.
While it is difficult to pinpoint the exact reasons behind Ethereum's inability to capitalize on gains in the cryptocurrency sector today, ETH investors do not seem particularly optimistic about the chances of approval of the Spot Ethereum ETF. . In addition, other factors, such as the ETH supply being inflated for the first time in 18 months due to reduced transaction fees, may also be contributing to keeping ETH prices below $3,000.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk and readers should conduct their own research when making decisions.
