Investors are unwilling to add long positions, as the Shanghai fork is expected to unlock a significant amount of ETH over a short period.

The price of Ether declined 6% between March 2 and 3, followed by tight-range trading near $1,560. Still, analyzing a wider time frame provides no clear trend, as its chart can point to a descending channel or a slightly longer seven-week bullish pattern.

Ether’s recent lack of volatility can be partially explained by the upcoming Shanghai hard fork, an implementation aimed at allowing ETH staking withdrawals. Those participants were each required to lock 32 ETH on the Beacon Chain to support the network consensus protocol.

After a series of delays, typical for changes in the production environment, the Shanghai Capella upgrade — also known as Shapella — is expected for early April, according to Ethereum core developer and project coordinator Tim Beiko. The Goerli testnet upgrade on March 14 will be the final rehearsal for the Shanghai hard fork before it is rolled out on the mainnet.

Recession risks increase, favoring ETH bears

On the macroeconomic front, United States Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee on March 7. Powell stated that interest rates will likely rise higher than anticipated after “the latest economic data have come in stronger than expected.”

Evidence points to the Fed lagging behind the inflation curve, boosting the odds of harder-than-expected interest rate increases and asset sales by the monetary authority. For instance, an inflation “surprise” index from Citigroup rose in February for the first time in more than 12 months.

For risk assets, including cryptocurrencies, a more substantial move by the Fed typically implies a bearish scenario, as investors seek shelter in fixed income and the U.S. dollar. This shift becomes more pronounced in a recessionary environment, which many speculate is either coming or already here.

The regulatory environment is adding additional pressure for cryptocurrency firms, especially after U.S. Press Secretary Karine Jean-Pierre said the White House has noted that the crypto-friendly bank Silvergate had “experienced significant issues” in recent months.

Let’s look at Ether derivatives data to understand if the $1,560 level is likely to become a support or resistance.

ETH derivatives show reduced demand for longs

The annualized three-month futures premium should trade between 5% and 10% in healthy markets to cover costs and associated risks. However, when the contract trades at a discount (known as “backwardation”) versus traditional spot markets, it shows a lack of confidence from traders and is deemed a bearish indicator.

The chart above shows that derivatives traders became slightly uncomfortable as the Ether futures premium (on average) moved to 3.1% on March 7, down from 4.9% one week prior. More importantly, the indicator became more distant from the 5% neutral-to-bullish mark.

Still, the declining demand for leverage longs (bulls) does not necessarily translate to an expectation of adverse price action. Consequently, traders should analyze Ether’s options markets to understand how whales and market makers are pricing the odds of future price movements.

The 25% delta skew is a telling sign th market makers and arbitrage desks are overcharging for upside or downside protection.

In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 10%. On the other hand, bullish markets tend to drive the skew metric below -10%, meaning the bearish put options are in less demand.

The delta skew moved above the bearish 10% threshold on March 4, signaling stress from professional traders. A brief improvement happened on March 7, although the metric continues to flirt with bearish expectations as options traders place higher costs on protective put options.

Investors basing their decisions on fundamentals will likely look to the first couple of weeks following the Shanghai upgrade to measure the potential impact of the ETH unlock. Ultimately, options and futures markets signal that pro traders are less inclined to add long positions, giving higher odds for $1,560 becoming a resistance level in the coming weeks.

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India has tightened its oversight of digital assets, imposing money laundering provisions on cryptocurrencies. 

The Finance Ministry issued a notice on Tuesday, announcing the imposition of the anti-money laundering legislation on crypto trading. 

India’s move aligns with that of regulators worldwide, increasing oversight and regulation of virtual assets. 

India has aligned its treatment of cryptocurrencies with that of the United States and regulators worldwide. The South Asian republic has imposed money laundering provisions on cryptocurrencies to tighten its oversight on virtual assets.

Indian Finance Ministry announces anti-money laundering legislation to crypto

Cryptocurrencies like Bitcoin, Ethereum, altcoins and stablecoins have seen an increase in regulatory scrutiny and oversight after the Terra-LUNA implosion, the FTX exchange collapse and lately, the Silvergate bank crisis. The tumultuous events of 2022 have garnered reactions from global lawmakers and regulators, and resulted in a regulatory crackdown in most countries. 

The Indian Finance Ministry issued a notice on Tuesday, announcing the imposition of the anti-money laundering legislation to crypto trading, safekeeping and related financial services. India’s move is a step in the direction to tighten the South Asian country’s oversight of digital assets. 

India’s steps to apply anti-money laundering policies to cryptocurrencies are aligned with moves made by regulated entities like banks and stock-brokers worldwide. In 2022, India imposed stringent tax rules on cryptocurrencies, including a levy on crypto trading. 

Experts at Bloomberg believe India’s move could cause a plunge in domestic crypto trading volumes. Jaideep Reddy, counsel at law firm Trilegal, was quoted as saying, “[The latest anti-money laundering measure] is concerning as implementing the requisite compliance measures is likely to require time and resources.”

Interestingly, despite US financial regulator Securities and Exchange Commission’s (SEC) crackdown on crypto firms, stablecoins and virtual assets, the global cryptocurrency market capitalization is above $1.05 Trillion. It remains to be seen whether increasing regulatory oversight will trigger a decline in the global crypto market cap. 

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