Overview
• Ethereum (ETH) investors remain unfazed by regulatory action against exchanges, focusing instead on the upcoming Shapella hard fork.
• The CFTC recently filed a lawsuit against Binance and CZ for providing derivatives trading services without a license.
• Analysts suggest traders monitor Ether derivatives markets to gauge market sentiment.
Ethereum Investors Unconcerned By Regulatory Action
Despite the Commodity Futures Trading Commission’s (CFTC) recent lawsuit against Binance and Changpeng „CZ“ Zhao, Ethereum (ETH) investors remain unfazed, with the price of Ether trading in a narrow range for the past twelve days. This indicates that ETH investors are instead choosing to focus on the network’s next upgrade, Shapella hard fork, rather than potential regulatory implications.
SEC Served Coinbase With Wells Notice
On March 22nd, the US Securities and Exchange Commission served Coinbase with a Wells notice in relation to its 2017 initial coin offering of tokens. Although traders may not have seen this news as sufficient reason to reduce their Ether positions due to increased regulatory risk, it is important to note that Binance holds 35% of open interest in Ether futures. Therefore, if traders are suddenly compelled to liquidate their positions or if there is sudden reduction in liquidity after US entities are effectively barred from Binance’s markets, there could be significant impact on Ether derivatives markets.
BitMEX Derivatives Exchange Experienced Outage During Bitcoin Crash
In March 2020 BitMEX experienced an outage following a 30-minute crash during Bitcoin trade which resulted in its market share advantage being lost. However it is impossible to predict how regulators will act in regards to Binance so it would be naive to assume that there is no chance of service interruption – even if clients can close positions and withdraw assets safely. Thus keeping an eye on Ether derivatives is essential for gauging market sentiment and reacting accordingly.
Conclusion
The annualized two-month futures premium should usually trade between 5% and 10%. When this premium trades at a discount relative to spot markets, it signals trader’s lack of confidence and acts as bearish indicator for the currency’s future prospects. Thus analysts suggest closely monitoring ETH derivatives markets in order better assess market sentiment when making investment decisions related to Ethereum (ETH).