Ethereum bulls ignore regulatory action against exchanges by preparing for the Shapella hard fork
For the past twelve days, the price of Ether (ETH) has been trading in a narrow descending range. Surprisingly, not even the news of Binance and Changpeng "CZ" Zhao being sued by the Commodity Futures Trading Commission (CFTC) was enough to break the support level.
The lawsuit, filed on March 27, claimed that Binance provided derivatives trading services to U.S.-based customers without first obtaining a derivatives license. Additionally, the US Securities and Exchange Commission served Coinbase with a Wells notice on March 22.
Even if traders saw no reason to reduce their Ether positions due to increased regulatory risk, Binance holds 35% of the open interest in Ether futures. Therefore, if traders are suddenly compelled to liquidate their positions or if there is a sudden reduction in liquidity after U.S. entities are effectively barred from Binance's markets, one should anticipate a significant impact on Ether derivatives markets.
One could point to the market's resiliency after BitMEX derivatives exchange lost its longtime market share advantage following a 30-minute outage in March 2020 during a Bitcoin crash. However, there is no way to predict the outcome of the regulators' case against Binance, so it would be naive to assume that there is a zero percent chance of a service interruption — even if it means clients can close positions and withdraw assets.
Instead of focusing solely on the ETH price, it is essential to closely monitor Ether derivatives to understand how professional traders will react.
In healthy markets, the annualized two-month futures premium should trade between 5% and 10% to cover associated costs and risks. However, when the contract trades at a discount (backwardation) relative to traditional spot
Read more on cointelegraph.com
