Ethereum (ETH) is poised for a notable improvement with the imminent Dencun upgrade to improve network scalability. However, amidst this expectation, QCP Capital, an experienced crypto asset trading firm, shed light in an emerging trend that could influence Ethereum’s price trajectory.
The company’s analysis reveals a change in “risk reversals” for Ethereum, becoming negative for the next maturities. This move indicates growing concerns among investors about a potential decline in the price of ETH, as a negative risk reversal often suggests a market tilted towards protective measures against a recession.
Market Leverage and Correction Concerns
Notably, this trend toward negative risk reversals has been attributed to a growing interest in put options, which serve as a hedge against potential losses for those speculating on price increases.
Additionally, broader altcoin market participants are equally hedging their Ethereum investments with the aim of mitigating the risks associated with their investments. altcoin holdings.
QCP Capital’s insights into market dynamics also highlight an underlying nervousness about Ethereum’s price stability, especially in light of the considerable leverage in the market.
The company warns of the potential for a market correction, although it expects strong buying interest in the event of any drop in prices. QCP noted in the report:
Altcoin speculators may also be purchasing ETH puts as a proxy to hedge the altcoin’s downside. This makes us suspicious of a possible correction given the amount of leverage in the market. However, we believe the market will aggressively buy any dips.
Additionally, Ethereum spot forward spreads have narrowed slightly, contrasting with Bitcoin’s sustained high spreads. Commenting on the implications for investors, QCP Capital stated:
A sharp drop in spot price will likely drag futures spreads lower as leveraged long positions are eliminated.
Ethereum Performance and Outlook
Despite signs of caution, Ethereum continues to perform “robust” in the crypto market, closely tracking Bitcoin in terms of price movements. At the moment trading above $4,000Ethereum has witnessed a modest increase of 0.6% in the last 24 hours.
Additionally, data from IntoTheBlock (ITB) reveals an encouraging statistic: over 94% of ETH addresses are currently profitable, suggesting a strong pattern of participation among investors and a reduced likelihood of selling pressure. This scenario could potentially set the stage for a price increase.
However, it is important to note that Ethereum’s growth trajectory, while positive, did not reflect the notable increase that Bitcoin experienced following the approval of its spot exchange traded fundindicating a more measured pace of appreciation for ETH.
Featured image from Unsplash, chart from TradingView
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