For the past twelve days, the Ether (ETH) price has been trading in a tight descending range. Surprisingly, not even the news of Binance and Changpeng “CZ” Zhao being sued by the Commodity Futures Trading Commission (CFTC) was enough to break the support level.
The lawsuit, filed on March 27, claims that Binance provided derivatives trading services to US-based clients without first obtaining a derivatives license. Additionally, the US Securities and Exchange Commission served Coinbase with a notice from Wells on March 22.
Even if traders saw no reason to reduce their Ether positions due to increased regulatory risk, Binance has 35% open interest in Ether futures. Therefore, if traders are suddenly forced to liquidate their positions or if there is a sudden reduction in liquidity after US entities are effectively delisted from Binance markets, a significant impact on derivatives markets should be anticipated. of ether.
Market resilience could be noted after the BitMEX derivatives exchange lost its long-standing market share advantage following a 30-minute outage in March 2020 during a Bitcoin crash. However, there is no way to predict the outcome of the regulators’ case against Binance, so it would be naive to assume that there is a zero percent chance of service disruption, even if it means clients can close positions and withdraw assets. .
Instead of focusing solely on the ETH price, it is essential to closely monitor Ether derivatives to understand how professional traders will react.
ETH derivatives show higher demand for longs
In healthy markets, the annualized two-month futures premium should trade between 5% and 10% to cover associated costs and risks. However, when the contract is trading at a discount (backwardation) relative to traditional spot markets, it indicates a lack of confidence by traders and is considered a bearish indicator.
![](https://technicalterrence.com/wp-content/uploads/2023/03/1680119837_610_Ethereum-bulls-ignore-regulatory-action-against-exchanges-as-they-prepare.png)
On March 29, derivatives traders using futures contracts turned slightly more bullish as the indicator moved to 4%. The futures premium reached its highest level in four weeks, despite remaining below the 5% neutral threshold. Those traders were even more confident that the market structure would remain stable.
Still, the increasing demand for long leverage (bullies) does not necessarily translate into an expectation of positive price action. Consequently, traders need to analyze the Ether options markets to understand how whales and market makers are pricing the probabilities of future price movements.
Related: SEC Chief Gary Gensler to Face Congress Over Cryptocurrency Policy
Options traders unfazed by regulators’ actions
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, pushing the bias indicator above 8%. On the other hand, bull markets tend to drive the bias metric below -8%, meaning bear put options are less in demand.
![](https://technicalterrence.com/wp-content/uploads/2023/03/1680119837_686_Ethereum-bulls-ignore-regulatory-action-against-exchanges-as-they-prepare.png)
The delta bias indicator has been neutral since March 22, indicating similar pricing for both up and down options. However, with the price of Ether nearing its highest level in seven months at $1,800, one would expect protective puts to trade at a premium, which is not the case.
Given the increased regulatory pressure on Coinbase and Binance, it is clear that the derivatives markets are showing signs of confidence. Ether’s bullish momentum could also be related to the confirmation of the Shapella fork on April 12. Validators will be able to withdraw their ETH coins from the Beacon Chain once Ethereum Enhancement Proposal EIP-4895 goes live.
The futures and options markets indicate that professional traders are not concerned about the actions of regulators against Binance and Coinbase. Those who believe that the descending channel pattern will break out have a strong case.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.
The views, thoughts, and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.