Ethereum is again the focus of attention as it nears the key $3,000 mark. Still, backed by a fresh wave of on-chain data, and this is a title backed by some bullish on-chain data, fresh wave of institutional inflows, and a slight uptick in exchange outflows these past couple days.
This was slightly negated by ETH options open interest hitting record levels yesterday. Still, there is somehow a vibe, a narrative weaving through the core ether community since last week’s low.
Currently, the second-largest cryptocurrency by market cap is negotiating a confluence of signals that are technical, behavioral, and institutional, and these signals suggest rising interest in a renewed upward move.
This week, one of the most obvious signs of bullish sentiment came from Ethereum’s exchange flow activity. On June 11, over 140,000 ETH, worth about $393 million at today’s prices, was pulled from centralized exchanges. That marked the largest single-day net outflow that we’ve had in more than a month. Historically, large outflows like that have been taken as a sign that investors are moving their assets into cold storage or DeFi protocols, rather than keeping them on platforms for immediate sale.
This trend is supportive of the idea that holders for the long term are once again surfacing and asserting themselves in a marketplace that is becoming increasingly optimistic. Meanwhile, the balances on exchanges continue to shrink, which means that the supply that is available to the marketplace is only getting tighter. If demand stays the same or picks up again, this could set the stage for some sort of a supply shock.
Ethereum is an optimistic emergence, but it has a lot of technical work to do to even get to $3,000. On-chain stats reveal a resistance zone evenly split between bulls and bears that culminates at a clear supply wall around $3,140. More than 3.7 million addresses have previously accumulated just under this level. With many of those wallets still down since back in February, analysts are saying to watch for potential short-term selling, as those holders might just need a reason to exit.
Making the case for an extended rally is a decisive shift in Ethereum’s options market. It is here where traders have clearly shown a growing interest in upside exposure over the past 48 hours. And by upside exposure, we mean they want to be positioned for Ethereum to go much, much higher. To do that, they’re piling into call options — contracts that profit when the price increases.
The open interest ratio of puts and calls has remained close to the current cycle’s low at 0.43. This certainly suggests an overwhelming tilt toward calls as compared to puts. Meanwhile, the ratio of put to call volume has dropped to 0.63. This might signify that more traders are putting their money where their mouth is when it comes to betting on an upward move as compared to a downward one.
Maybe the most revealing is the movement in options skew, a measure of how much implied volatility differs between calls and puts. Ethereum’s 1-week skew moved from -2.4% to -7.0%, and the 1-month skew went from -5.6% to -6.1%, showing that our old friend negative skew is getting deeper. In plain language, this means that short-dated call options are being sought more than ever, which usually means traders are getting ready for a nice, big pop in the not-too-distant future.
The change in sentiment has also been reflected in the volatility surface, with implied volatility increasing on the upside, which in turn is giving even more affirming bullish momentum to the options market.
The interest among institutions in Ethereum continues to grow stronger. This is clear from an uninterrupted influx of institutional money into Ethereum exchange-traded funds (ETFs). On June 11, the latest date for which data was available, ETFs tied to the price of Ethereum saw a net inflow of $240 million. That pushed their record streak of consecutive days with positive inflows to an impressive 18.
These inflows mirror the general market appetite for Ethereum among institutions and big investors that prefer to put their money in regulated ETF products instead of direct crypto holdings. The price pressure from natural selling isn’t as intense when there’s consistent buying, and that’s what these inflows represent.
When you take ETF inflows together with exchange outflows and (bullish derivatives) activity, you have a pretty strong case for continuing price strength of Ethereum.
Ethereum’s bid to take back and hold the $3,000 level seems more believable than at any recent week in the last few months. On-chain data showing massive withdrawals from exchanges, options markets skewing very sharply bullish, and institutional capital flowing steadily into ETFs all tell a story of a potential breakout.
Nonetheless, the $3,140 supply wall is a significant barrier. If Ethereum bulls can leap over that hurdle, if they can push Ethereum past the $3,140 point and hold it past the $3,140 point for some time, might we then call Ethereum’s summer 2021 run a bull market? And what about the price levels past $3,140? What if Ethereum moves on to price levels near to $3,400? Or what if it reaches past that point?
The next move, as always, depends on how the market behaves; but this time, it looks like the bulls have the upper hand.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
