Ether (ETH) experienced a surprising 8% rally on Nov. 9, breaking the $2,000 barrier and achieving its highest price level in six months. This surge came as a shock to many in the cryptocurrency market and was triggered by news of BlackRock registering the iShares Ethereum Trust in Delaware. The initial announcement was made by @SummersThings on a social network and was later confirmed by Bloomberg ETF analysts. This development fueled optimistic expectations regarding a potential Ether spot ETF filing by BlackRock, a $9 trillion asset manager.
Leverage and Liquidations
The news of BlackRock’s registration of the iShares Ethereum Trust resulted in $48 million worth of liquidations in ETH short futures. This indicates that many investors had taken short positions on ETH, betting against its success. However, with no official statement from BlackRock, these investors may have jumped the gun. The sheer influence of BlackRock in traditional finance leaves those betting against Ether’s success in a precarious position.
To understand how professional traders are positioned after the surprise rally, one should analyze the ETH derivatives metrics. Normally, Ether monthly futures trade at a 5%–10% annualized premium compared to spot markets, indicating that sellers demand additional money to postpone settlement. The Ether futures premium, jumping to 9.5% on Nov. 9, marked the highest level in over a year and broke above the 5% neutral threshold on Oct. 31. This shift ended a two-month bearish period and low demand for leveraged long positions.
To assess whether the break above $2,000 has led to excessive optimism, traders should examine the Ether options markets. When traders anticipate a drop in Bitcoin’s price, the delta 25% skew tends to rise above 7%, while periods of excitement typically see it dip below negative 7%. The Ether options 25% delta skew shifted from neutral to bullish on Oct. 31, and the current -13% skew is the lowest in over 12 months, but still far from being overly optimistic. This indicates that Ether investors were anticipating the bullish momentum even before the news of BlackRock’s registration.
Ethereum Network Demand
There’s little doubt that Ether bulls got the upper hand regardless of the spot ETF narrative as ETH rallied 24% before the BlackRock news, between Oct. 18 and Nov. 8. This price action reflects a higher demand for the Ethereum network, as reflected by the top decentralized applications (DApps) 30-day volumes.
Inconsistencies in Retail Indicators
However, when analyzing the broader cryptocurrency market structure, especially the retail indicators, there are some inconsistencies with the surging optimism and demand for leverage using Ether derivatives. One such inconsistency is the stagnation in Google searches for “Buy Ethereum,” “Buy ETH,” and “Buy Bitcoin” over the past week. This suggests that retail traders are not currently actively entering the market.
Another indicator of retail trader activity is the stablecoins premium, which measures the difference between China-based peer-to-peer USD Tether (USDT) trades and the United States dollar. Excessive buying demand tends to pressure the indicator above fair value at 100%, but currently, the Tether premium on OKX stands at 100.9%, indicating a balanced demand from retail investors. This suggests that Chinese investors are yet to present an excessive demand for fiat-to-crypto conversion using stablecoins.
A Test for the $2,000 Support Level
In essence, Ether’s rally above $2,000 seems to have been driven by derivatives markets and the expectation of a spot ETF approval. The lack of retail demand is not necessarily an indicator of an impending correction, but the hype around BlackRock’s Ethereum Trust registration, coupled with excessive leverage longs in ETH derivatives, raises concerns. This puts the $2,000 support level to the test and will determine whether the rally is sustainable in the long term.