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Security or not, Ether looks poised to hold the $1.8K level based on 3 key metrics

Security or not, Ether looks poised to hold the $1.8K level based on 3 key metrics

The news of the United States Securities and Exchange Commission (SEC) suing cryptocurrency exchanges Binance and Coinbase seems to have affected Ether’s price, as it retested $1,780. However, Ether bulls can find some relief in the fact that its price did not break below the 67-day support. According to some analysts on Crypto Twitter, the SEC’s actions can be a double-edged sword for Ether. Although it was not listed as a security in either of the cases brought against Binance and Coinbase, the competition to Ethereum’s smart contract-processing capabilities, BNB (BNB), Solana (SOL), and Cardano (ADA), was mentioned by the SEC.

However, Jevgenijs Kazanins, an analyst, noted that Ether’s omission does not mean that it has the green light from the SEC and wondered if the SEC could have a separate lawsuit targeting the Ethereum Foundation.

For now, Kazanins’ idea remains a mere unfounded speculation. However, as SEC Chairman Gary Gensler refused to answer questions about Ether’s status before the U.S. House Financial Services Committee in April 2023. Kazanins’ suggestion is not entirely baseless.

Despite the ongoing debate on Ether’s status, traders can focus on Ether’s price action, network data, and other data impacting investor sentiment and price in the short term.

Ethereum DApps get a slight boost

The indicator measuring the deposits locked in Ethereum’s decentralized applications (DApps), Total Value Locked (TVL), has been in a downtrend since mid-March. However, it bounced back to 14.6 million ETH on June 6 after reaching a 14.35 million ETH bottom on June 3, according to DefiLlama. Meanwhile, the number of active addresses interacting with DApps has remained in a slump. The top 12 DApps running on the Ethereum network saw a 4% increase in active addresses over the last 30 days, even though the average transaction gas fee remained above $6.50.

Ethereum’s 30-day DApp activity. Source: DappRadar

If investors fear that Ether’s price might break below the $1,800 support, this should be reflected in the ETH futures contract premium and increased costs for protective put options.

Ether derivatives metrics neutral as regulations ramp up

Ether quarterly futures are popular among whales and arbitrage desks. Nevertheless, these fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers demand more money to delay settlement. Thus, ETH futures contracts in healthy markets should trade at a 4 to 8% annualized premium, which is known as contango, a situation not unique to crypto markets.

Ether 2-month futures annualized premium. Source: Laevitas

According to the futures premium, known as the basis indicator, professional traders have been avoiding leveraged longs, or bullish bets. However, not even the retest of the $1,780 level on June 6 was enough to flip those whales and market makers into a bearish sentiment.

One should analyze the ETH options markets to exclude externalities that might have solely impacted the Ether futures. The 25% delta skew indicator compares similar call (buy) and put (sell) options and turns positive when fear is prevalent due to the protective put option premium being higher than the call options.

Ether 30-day 25% skew. Source: Laevitas

The skew indicator moves above 8% when traders fear an Ether price crash. On the other hand, if there is generalized excitement, it 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 moved the metric back to a neutral state.

Related: Coinbase reminds world it tried to ’embrace regulation’ as SEC sues for violations

Ether’s price looks poised to hold above $1,800

Overall, 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 network usage data remains healthy, and the recent retest of the 67-day support was not enough to scare professional traders, according to derivatives metrics. As a result, bulls seem to have dodged a bullet, greatly reducing the risk of an imminent price crash.