Traders pull back after Ethereum price rejects $2,000

Ether (ETH) rejected the $2,000 resistance on August 14, but the solid 82.8% gain since the ascending wedge formation started on July 13 certainly seems like a victory for bulls. Undoubtedly, the “ultrasound money” dream is getting closer as the network expects the Merge transaction to a proof-of-stake (PoS) consensus network on September 16.

Ether price index in USD, 12-hour chart. Source: TradingView

Some critics point out that the transition from proof-of-work (PoW) mining has been delayed for years, and that the merger itself does not address the scalability issue. The network’s migration to parallel processing (sharding) is expected to take place later in 2023 or early 2024.

As for the Ether bulls, the EIP-1559 burning mechanism introduced in August 2021 was instrumental in driving ETH to scarcity, as cryptoanalyst and influencer Kris Kay illustrates:

The highly anticipated transition to the Ethereum beacon chain received a lot of criticism, despite eliminating the need to support the expensive energy-intensive mining activities. Below, “DrBitcoinMD” highlights the impossibility of ETH players withdrawing their coins, creating an unsustainable temporary reduction in the supply side.

Undoubtedly, the reduced amount of coins available for sale caused a supply shock, especially after the 82.8% rally that Ether has recently undergone. Still, these investors knew the risks of ETH 2.0 staking, and no promises of immediate transfers were made after the merger.

Options markets reflect doubtful sentiment

Investors should look at Ether’s derivatives market data to understand how whales and arbitrage tables are positioned. 25% delta bias is a clear sign when traders are charging too much for upside or downside protection.

If these market participants feared an Ether price crash, the bias indicator would move above 12%. On the other hand, generalized tension reflects a negative bias of 12%.

Ether 30-day options 25% delta bias: Source: Laevitas.ch

The skewness indicator remained neutral since Ether started its rally, even when it tested the $2000 resistance on August 14. The absence of improvement in market sentiment is a bit worrying because ETH options traders are currently considering similar upside and downside price movements.

Related: Ethereum ICO era whale address transfers 145,000 ETH weeks before merger

Meanwhile, long-to-short data is showing low confidence at the $2,000 level. This calculation excludes externalities that may have solely affected the options markets. It also collects data from exchange clients’ positions on spot, perpetual and quarterly futures contracts, thereby providing better information on how professional traders are positioned.

There are occasional methodological discrepancies between different exchanges, so readers should monitor changes rather than absolute numbers.

The exchange’s top traders Ether long-to-short ratio. Source: Coinglass

Although Ether has risen 18% from August 4th to August 15th, professional traders reduced their leveraged long positions somewhat, according to the long-to-short indicator. For example, Binance traders’ ratio improved slightly from the start of 1.16, but ended the period below the initial level near 1.12.

Meanwhile, Huobi showed a modest decline in its long-to-short ratio, as the indicator moved from 0.98 to today’s 0.96 in eleven days. Finally, the metric peaked at 1.70 on the OKX exchange, but increased only slightly from 1.46 on August 4th to 1.52 on August 15th. Therefore, on average, traders were not confident enough to keep their bullish positions.

There has not been a significant change in whales and market makers’ leveraged positions despite Ether’s 18% gains since August 4th. If options traders are pricing similar risk for Ether’s upside and downside moves, there is likely a reason for this. For example, strong support of the proof-of-work fork would push ETH.

One thing is for sure, at the moment professional traders are not sure that the $2000 resistance will be easily broken.

The views and opinions expressed herein are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trade involves risk. You should do your own research when making a decision.