Ethereum Could See Price Correction: QCP Capital

Ethereum (ETH), the second-largest crypto by market cap, has caught the attention of investors as its risk reversals turned negative for front-date expiries, according to the data from QCP Capital, a Singapore-based crypto asset trading firm. Risk reversal provides insights into traders’ sentiments. ETH’s negative risk reversal shows an increase in demand for put options, potentially driven by concerns over the vulnerability of speculative long positions.

According to QCP Capital, traders increasingly seek protection against a possible downturn in ETH. Meanwhile, individuals who have invested in altcoins are also joining the trend. They are buying ETH puts to protect themselves from potential losses in alternative cryptocurrencies. QCP Capital expresses concern about a potential market correction, particularly considering the significant leverage present in the market. However, despite these concerns, the firm’s analysts anticipate that any price dip will be met with aggressive buying activity.

The crypto firm stated:

“Given the market’s leverage, this makes us wary of a possible correction. However, we think that the market will buy any dip aggressively.”

Besides the negative risk reversals, QCP Capital observes a small decrease in ETH spot-forward spreads. In comparison, Bitcoin (BTC) markets have higher spreads. This divergence shows that a sudden drop in Ethereum spot prices could lead to further compression in forward spreads as leveraged long positions are liquidated.

Low Chances of Ethereum ETF Approval Shifts Market Sentiment

The shift in market sentiment is due to the low probability of a spot Ethereum exchange-traded fund (ETF) being approved in the near future. Bloomberg analysts have reduced the likelihood of a spot ETH ETF approval in May to 30%. In January, Senior ETF Analyst Eric Balchunas said there was a 70% chance of approval by May, while his colleague James Seifert estimated 60-65%.

This #Ethereum ETF cycle feels like the opposite of #Bitcoin ETF approval odds at the moment. The more we see/hear (and don't see/hear) the less optimistic I become.

We're ~73 days from the deadline and there really seems to be little to no movement https://t.co/N6OpM870XF

— James Seyffart (@JSeyff) March 11, 2024

Popular crypto analyst Ali Martinez believes the ETH could reach $5000. However, the altcoin must break through the supply wall between $4,522 and $4,646. Utilizing data from IntoTheBlock, Ali Martinez said 600,000 addresses bought 1.63 million ETH around that region. Ethereum is trading at $4,057, showing a 24-hour gain of 1.28% at the time of reporting.