ether (ETH) has been stuck between $1,170 and $1,350 from Nov. 10-15, a relatively narrow 15% range. During this time, investors continue to digest the negative impact of the Nov. 11 Chapter 11 bankruptcy filing FTX exchange.
Meanwhile, total ether market volume was up 57% from the previous week at $4.04 billion per day. This data is even more relevant given the collapse of Alameda Research, the arbitrage and market-making firm controlled by FTX founder Sam Bankman-Fried.
On a monthly basis, Ether’s current level of $1,250 shows a modest 4.4% drop, leaving traders FTX and Alameda Research little to blame for the 74% drop from the all-time high of $4,811 set in November 2021.
While risks of contagion have caused investors to empty the wallets of centralized exchanges, the movement led to one Increase in activity of decentralized exchanges (DEX).. Uniswap, 1inch Network and SushiSwap have seen their number of active addresses increase by 22% since November 8th.
Let’s take a look at derivatives metrics to better understand how professional traders are positioned in the current market conditions.
Margin markets are showing no signs of distress
Margin trading allows investors to borrow cryptocurrency to leverage their trading position and potentially increase their returns. For example, one can buy Ether by borrowing Tether (USDT), increasing their crypto exposure. On the other hand, borrowing ether can only be used to short ether or bet on a price drop.
Unlike futures contracts, the balance between Margin longs and shorts doesn’t necessarily fit. When the margin lending ratio is high, it indicates the market is bullish – on the contrary, a low lending ratio signals the market is bearish.
The chart above shows investor morale, which was surpassed on November 13 when the ratio hit 5.7, its highest level in two months. From that point on, however, OKX traders showed less demand for price uptrend bets as the indicator retreated to the current level of 4.0.
Still, the current credit ratio is trending higher in absolute terms, which favors the inclusion of stablecoins by a wide margin. It is worth noting that overall sentiment has improved since Nov. 8 as traders ramped up demand for stablecoin margined longs.
Long-to-short data shows less demand for leveraged longs
The top traders’ net long-to-short ratio excludes externalities that may have only impacted margin markets. By aggregating positions on spot, perpetual, and quarterly futures contracts, analysts can better understand whether professional traders are bullish or bearish.
There are occasional methodological discrepancies between different exchanges, so viewers should watch changes rather than absolute numbers.
Huobi’s long-to-short ratio was 0.98 between November 8 and November 15, indicating a balanced situation between leveraged buyers and sellers. On the other hand, Binance traders initially faced a sharp drop in demand for longs, but the movement was extremely muted as buying activity dominated from November 11th.
On the OKX exchange, the metric plummeted from 1.30 on Nov 8 to the current 0.81, favoring shorts. Therefore, according to the long-to-short indicator, the top traders significantly reduced their long positions until November 10, but then increased their long positions.
From a derivatives analysis perspective, neither futures nor margin markets show excessive demand for short positions. Had panic-based sentiment prevailed, one would expect deterioration in ether lending conditions and long-to-short indicators.
Consequently, the bulls are in control as traders are uncomfortable taking bearish positions with ETH below $1,300.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.