Ethereum bears have the upper hand based on derived data, but for how long?

ether (ETH) experienced a drop of 11.9% from November 20 to 22, bottoming out at $1,074, the lowest level seen since July. Investors currently have reason to be concerned after crypto lending company Genesis reportedly faced difficulties raising money, sparking rumors of insolvency on November 21.

However, a Genesis spokesperson told Cointelegraph that there were no plans for an imminent bankruptcy because the company is still in talks with its creditors.

The concern about the centralization of decentralized finance (DeFi) arose after Uniswap Labs changed the privacy policy on Nov. 17, revealing that it collects publicly available blockchain data, user browser information, operating system data, and interactions with its service providers.

Adding to the fight, the hacker behind the $447 million FTX exchange theft has been seen moving his Ether funds. On November 20, the attacker transferred 50,000 ETH to a separate wallet and converted it to Bitcoin using two renBTC bridges.

Traders fear that the hacker may be suppressing the price of Ether to make a profit using leveraged short bets. The rumor was raised by @kundunsan on November 15, despite the Twitter post not gaining exposure.

Let’s look at ether derivatives data to understand whether worsening market conditions have affected crypto investor sentiment.

Professional traders have been in panic mode since November 10

Quarterly futures are often avoided by retail traders because of their price differential to spot markets, but they are preferred instruments by professional traders because they avoid the fluctuation in funding rates that often occurs in a perpetual futures contract.

2-month ether futures annualized premium. Source: Laevitas.ch

The annualized 3-month futures premium should trade between +4% and +8% in healthy markets to cover costs and associated risks. The chart above shows that derivatives traders have been bearish since November 10, as the Ether futures premium was negative.

There is currently a backwardation in the contracts and this situation is atypical and is usually considered bearish. The metric did not improve after ETH rallied 5% on Nov. 22, reflecting the unwillingness of professional traders to add leveraged long (bullish) positions.

Traders must also analyze Ether Options Markets to exclude the specific externalities of the futures instrument.

Options traders fear further dips

The 25% delta bias is a telltale sign when market makers and arbitrage desks are overcharging for upside or downside protection.

In bear markets, option investors give higher odds of a price dump, driving the bias indicator to rise above 10%. On the other hand, bullish markets tend to drive the bias indicator below -10%, which means bearish put options are discounted.

Ether 60-day options 25% delta bias: Source: Laevitas.ch

The delta bias has been above the 10% threshold since Nov. 9, indicating that options traders were less inclined to offer downside protection. The situation worsened in the following days when the delta bias indicator exceeded 20%.

The 60-day delta bias is currently 23%, so whales and market makers are pricing in higher odds of price dumps for Ether. Consequently, the derivatives data shows low confidence just as Ether struggles to hold the $1100 support.

Based on the data, Ether bulls should not throw in the towel just yet because these metrics tend to be backward looking. The panic that followed the FTX bankruptcy and subsequent liquidity problems at Genesis could quickly dissipate if exchange public proof of reserves Y institutional investors adding exposure to Bitcoin during the fall they are interpreted as positive by market participants.

That being said, right now Ether bears still have the upper hand according to ETH derivatives metrics.