Ether (ETH) price is up 16% since July 1 and has outperformed Bitcoin (BTC) in the last 7 days. The move could be partially driven by investors clinging to their hopes that the Ethereum network transition to proof-of-stake (PoS) consensus will be a bullish catalyst.

The next steps for this smart contract involve "the Merge," which was previously known as Eth 2.0. The final trial on the Goerli test network is expected in July before the Ethereum mainnet gets the green light for its upgrade.

Since Terra’s ecosystem collapsed in mid-May, Ethereum’s total value locked (TVL) has increased and the flight-to-quality in the decentralized finance (DeFi) industry largely benefited Ethereum thanks to its robust security and battle-tested applications, including MakerDAO.

Total value locked by market share. Source: Defi Llama

Ethereum currently holds a 57% market share of TVL, up from 51% on April 8, according to data from Defi Llama. Despite this gain, the current $35 billion in deposits on the networks' smart contracts seem small compared to the $100 billion seen in December 2021.

Further supporting the decrease in decentralized application use on Ethereum is a drop in the median transfer fees, or gas costs, which currently stand at $1.32. This figure is the lowest since mid-December 2020 when the network's TVL stood at $13 billion. However, one might attribute part of the movement to higher use of layer-2 solutions such as Polygon and Arbitrum.

Options traders flirt with the neutral range

Traders should look at Ether's derivatives markets data to understand how whales and market makers are positioned. In that sense, the 25% delta skew is a telling sign whenever professional traders overcharge for upside or downside protection.

If investors expect Ether price to rally, the skew indicator moves to -12% or lower, reflecting generalized excitement. On the other hand, a skew above 12% shows reluctance to take bearish strategies, typical of bear markets.

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

The skew indicator briefly touched the neutral-to-bearish range on July 7 as Ether completed a 19% rally in four days. But those option traders soon shifted to a more conservative approach, giving higher odds of a market downturn as the skew moved to the current 13% level. In short, the higher the index, the less inclined traders are to price downside risk.

Margin traders have turned extremely bullish

To confirm whether these movements were confined to the specific options instrument, one should analyze the margin markets. Lending allows investors to leverage their positions to buy more cryptocurrency. When those savvy traders open margin longs, their gains (and potential losses) depend on the Ether price increase.

Bitfinex margin traders are known for creating position contracts of 100,000 ETH or higher in a very short time, indicating the participation of whales and large arbitrage desks.

Bitfinex ETH margin longs. Source: Coinglass

Interestingly, these margin traders greatly increased their longs since June 13 and the current 491,000 contracts is near its highest level in 8 months. This data shows that these traders are effectively not expecting a disastrous price move below $900.

While there hasn't been a significant shift in pro traders' options risk metrics, margin traders remain bullish and are unwilling to decrease their longs despite the "crypto winter."

If these whales and market makers are convinced that $880 on June 18 was the absolute bottom, traders may begin to believe that the worst leg of the bear market is behind us.

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