The price of Ether (ETH) briefly retested $1,780 after news of the US Securities and Exchange Commission (SEC) suing Binance and Coinbase, but the fact that it did not break below the 67-day support is a positive sign for the cryptocurrency. The SEC’s actions are a double-edged sword for Ethereum. Some analysts attribute the bounce in Ether’s price to its exclusion from the list of securities in both cases brought against Binance and Coinbase. However, this does not mean that the SEC has granted Ethereum a green light. Analyst Jevgenijs Kazanins raises the question of whether the SEC could be targeting the Ethereum Foundation in a separate lawsuit. The idea is currently a mere speculation, but it certainly has merit given that SEC chairman Gary Gensler refused to answer questions about Ethereum’s status before the US House Financial Services Committee in April 2023.
Ethereum’s Resilience
Despite the uncertainty surrounding the SEC’s actions, Ethereum’s network usage data remains healthy. The total value locked (TVL) measures the deposits locked in Ethereum’s decentralized applications, which have been in a downtrend since mid-March. However, the indicator reached a 14.35 million ETH bottom on June 3 but bounced back to 14.6 million ETH by June 6, according to DefiLlama. The number of active addresses interacting with decentralized applications (DApps) is also in a slump, but over the last 30 days, the top 12 DApps running on the Ethereum network saw a 4% increase in active addresses, even though the average transaction gas fee remained above $6.5.
If investors fear that Ether has higher odds of breaking below the $1,800 support, it should be reflected in the ETH futures contract premium and increased costs for protective put options. ETH quarterly futures are popular among whales and arbitrage desks. However, these fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement. As a result, ETH futures contracts in healthy markets should trade at a 4 to 8% annualized premium—a situation known as contango, which is not unique to crypto markets.
According to the futures premium, known as the basis indicator, professional traders have been avoiding leveraged longs (bullish bets). Still, not even the retest of the $1,780 level on June 6 was enough to flip those whales and market makers into bearish sentiment. The 25% delta skew indicator compares similar call (buy) and put (sell) options and will turn positive when fear is prevalent because the protective put option premium is higher than the call options. The skew indicator will move above 8% if traders fear an Ether price crash. On the other hand, generalized excitement reflects a negative 8% skew. As displayed above, the 25% delta skew moved above the positive 8% threshold on June 5, indicating bearishness. However, the subsequent bounce to $1,880 on June 6 has moved the metric back to a neutral state.
In short, these three indicators signal resilience—namely, the TVL bounce to 14.6 million ETH, the 4% increase in DApps active addresses, and a meager impact on Ether derivatives markets despite the retest of the $1,800 level. Ethereum’s network usage data remains healthy, and the recent retest of the 67-day support did not scare professional traders, according to derivatives metrics. Consequently, bulls seem to have dodged a bullet, greatly reducing the risk of an imminent price crash.