Market Alert: Ethereum Faces Potential Downfall As Dencun Upgrade Looms Heres Why
Ethereum (ETH) is poised for a notable improvement with the impending Dencun upgrade to enhance the networks scalability. However, amidst this anticipation, QCP Capital, a seasoned crypto asset trading firm, has shed light on an emerging trend that might influence Ethereums price trajectory.
The firms analysis reveals a shift in risk reversals for Ethereum, turning negative for upcoming expiries. This shift indicates growing concerns among investors about a potential decrease in ETHs price, as a negative risk reversal often suggests a market leaning towards protective measures against a downturn.
Market Leverage And Correction Concerns
Notably, this trend towards negative risk reversals has been attributed to an increased interest in put options, which serve as a hedge against potential losses for those speculating on price increases.
Moreover, the broader altcoin market participants are similarly hedging their investments in Ethereum, aiming to mitigate risks associated with their altcoin holdings.
QCP Capitals insights into the market dynamics also highlight an underlying nervousness about Ethereums price stability, especially in light of the considerable leverage within the market.
The firm cautions about the potential for a market correction, albeit with an expectation of strong buying interest in the event of any price dips. QCP noted in the report:
Altcoin speculators might also be buying ETH puts as a proxy to hedge altcoin downside. This makes us wary of a possible correction given the amount of leverage in the market. However, we think that the market will buy any dip aggressively.
Additionally, Ethereums spot-forward spreads have decreased slightly, contrasting with Bitcoins sustained high spreads. Commenting on the implication for investors, QCP Capital stated:
A sharp drop in spot price is likely to drag the forward spreads lower as leverage longs get taken out.
Ethereum Performance And Outlook
Despite the cautionary signals, Ethereum continues to perform robustly in the crypto market, closely trailing Bitcoin regarding price movements. Currently trading above $4,000, Ethereum has witnessed a modest increase of 0.6% over the past 24 hours.
Moreover, data from IntoTheBlock (ITB) reveals an encouraging statistic: over 94% of ETH addresses are presently profitable, suggesting a strong holding pattern among investors and a reduced likelihood of selling pressure. This scenario could potentially set the stage for a price uptick.
However, its important to note that Ethereums growth trajectory, while positive, has not mirrored the notable surge Bitcoin experienced following the approval of its spot Exchange-Traded Fund, indicating a more measured pace of appreciation for ETH.
Featured image from Unsplash, Chart from TradingView
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Source: NewsBTC.com
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