Here’s why Bitcoin bulls might trample $50K ahead of Friday’s $2B BTC options expiry

August 24, 2021 Coin Telegraph

Here’s why Bitcoin bulls might trample K ahead of Friday’s B BTC options expiry

Bitcoin has lost the $50,000 level but derivatives data lays out a few good reasons why bulls might march on the resistance level ahead of Friday’s $2 billion BTC options expiry.

$2 billion worth of Bitcoin (BTC) options will expire on Friday, Aug. 27. Some analysts argue that a strong call (buy) option buying activity on Aug. 22 was likely the catalyst for the recent $50,000 price test.

Digital asset trading firm QCP Capital mentioned in its market update that an entity has been "consistently pushing (option) prices higher in the last few weeks." The activity, which took place during the morning trading session in Asia, aggressively bought bullish options in chunks of 100 BTC contracts each.

The report also mentions the exhaustion of regulatory concerns in the near term, as crypto-related decisions from the Senate Banking Committee and regulators are unlikely to bear fruits in 2021.

Bears might be analyzing different data

However, the most recent "The Week On Chain" report from blockchain analytics provider Glassnode included some concerning data from Bitcoin on-chain activity. Such analysis found that the amount of entity-adjusted transactions has not responded to the ongoing bullish action.

Moreover, Decentrader, a crypto market-intelligence provider, highlighted insufficient trading volume during this recent move to push BTC's price above $52,000.

*Bitcoin options aggregate open interest for Aug. 27. Source: Bybt.com*

Friday will be an important test of the $50,000 level, as 4,372 BTC option contracts await the $218 million decision.

The initial call-to-put analysis shows the vast dominance of the neutral-to-bullish call instruments, with 60% larger open interest. Nevertheless, bulls might have been too optimistic, as 68% of their bets have been placed at $50,000 or higher.

91% of the put options will probably be worthless at expiry

On the other hand, 91% of the protective put options have been placed at $46,000 or below. Those neutral-to-bearish instruments will become worthless if Bitcoin trades above that price on Friday. The options expiry happens at 8:00 am UTC, so some additional volatility is expected ahead of the event.

Below are the four most likely scenarios, considering the current price levels. The imbalance favoring either side represents the potential profit from the expiry considering calls (buy) options are more frequently used in bullish strategies, whereas protective puts are used in neutral-to-bearish trades.

Below $45,000: 4,040 calls vs. 2,500 puts. The net result is a $69 million advantage for the neutral-to-bullish instruments.
Above $46,000: 6,500 calls vs. 1,300 puts. The net result is $239 million favoring the neutral-to-bullish instruments.
Above $48,000: 7,400 calls vs. 420 puts. The net result is a $335 million advantage for neutral-to-bullish instruments.
Above $50,000: 12,000 calls vs. 35 puts. The net result is a $600 million advantage for neutral-to-bullish instruments.

The above data shows how many contracts will be available on Friday, depending on the expiry price. There's no way to measure the net result for every market participant as some investors could be trading more complex strategies, including market-neutral ones using both calls and protective puts.

Those two competing forces will show their strength as bears will try to minimize the damage. Either way, bulls have complete control of Friday's expiry, and there seem to be enough incentives for them to defend the $48,000 level and even try a more significant gain by pushing the price above $50,000.

Meanwhile, bears should concentrate on the September expiry, although keeping in mind that El Salvador is expected to introduce Bitcoin as legal tender next month. In addition, the country is building the infrastructure to support a state-issued Bitcoin wallet called Chivo.

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.

FTX buys name rights to Cal Memorial Stadium for 10 years in $17.5M deal

August 24, 2021 Coin Telegraph

FTX buys name rights to Cal Memorial Stadium for 10 years in .5M deal

Cal Golden Bears

FTX has purchased naming rights to the Cal Memorial Stadium in its second major sports branding venture after buying the naming rights to the Miami Heat arena in March.

Crypto derivatives exchange, FTX, has purchased the naming rights to California University’s Cal Memorial Stadium with a view to introducing its own branding.

The Sam Bankman-Fried owned derivatives exchange is delving deeper into sports after signing a 10-year, $17.5 million naming rights deal with the university.

The stadium's home team, the Cal Golden Bears, will now play their games on newly rebranded FTX Field this football season, according to Bloomberg. The $17.5 million will also be paid to the university in the form of crypto assets.

The deal is FTX's latest foray into sponsoring sports to drum up awareness of crypto.

In March, the North American division of the exchange, FTX.US, entered into a naming rights deal with the Miami Heat basketball team. The partnership saw the team’s home-stadium rebranded to FTX Arena.

The company is also the official crypto exchange of Major League Baseball (MLB). As part of the sponsorship deal, which is expected to last for at least 5 years, every MLB umpire will don an FTX patch on their uniform.

The Cal Memorial stadium is located in Alameda County, the namesake of Bankman-Fried’s trading firm, Alameda Research.

Some of FTX’s executives also have long-standing ties to the Cal Golden Bears, with Chief Operating Officer Sina Nader having been a walk-on member of the Golden Bears when he was an undergraduate.

In June, seven-time Super Bowl champion quarterback Tom Brady and wife Gisele Bündchen partnered with FTX to promote crypto adoption.The deal saw Brady and Bündchen each take equity stakes in FTX and receive crypto.

On July 20, Cointelegraph reported that FTX smashed the crypto funding record with a $900 million raise to become an “exchange decacorn” — a company worth over $10 billion.

Time to pump? Data suggests traders intend to push Filecoin (FIL) above $100

August 23, 2021 Coin Telegraph

Time to pump? Data suggests traders intend to push Filecoin (FIL) above 0

Chainlink

Derivatives data and recent protocol developments signal that retail traders have turned bullish on FIL.

Filecoin (FIL) accumulated 65% gains over the past 30 days to reach its highest price since June 8. The recent strength was accelerated after an Aug.6 partnership with Chainlink's oracle protocol on Aug. 6 allowed the projects to join their grant initiatives to speed up the development of hybrid smart contracts to leverage code running on the blockchain while the managing data computation process off-chain.

*Filecoin (FIL) price in USD at Coinbase. Source:* *TradingView*

Numerous events triggered the $235 all-time-high on April 1, but that movement is clearly long gone because the cryptocurrency is 67% below that level. Let's take a moment to understand what triggered the rally and whether these drivers still exist.

China-based mining activity boosted investors' expectations

Filecoin is a decentralized cloud-based data storage network that allows its users to gain rewards for selling their excess storage on an open-source platform. The built-in economic incentives ensure files are reliably stored over time.

The network's storage capacity surpassed 2.5 exabytes in February, which lead to positive remarks from influencers like Cameron Winklevoss, the billionaire investor and co-founder of the Gemini exchange.

The amount of network storage power, active miners, and Github contributors continues to grow on the @Filecoin $FIL network. Not surprised to see price rocketing. pic.twitter.com/0Ua77UJlgl
— Cameron Winklevoss (@cameron) March 17, 2021

On March 17, Grayscale Investments, the digital currency asset manager behind the GBTC Trust, announced the launch of its Filecoin investment vehicle.

On March 25, a $23 million Filecoin Ecosystem Fund was announced, backed by large Chinese investment groups like Fenbushi Capital, SNZ Capital, and Neo's EcoFund.

New smart contract capabilities are expected and FIL's daily issuance was cut

On March 31, Qtum founder Patrick Dai said that the protocol was working to enable smart contracts for Filecoin through the Qtum network.

On April 10, Martin Gaspar, a research analyst at CrossTower exchange, told Cointelegraph that solid demand from Chinese miners emerged due to a shortage of proof-of-work rigs. Gaspar added that these miners "are required to pledge the FIL token as collateral, resulting in demand for the token."

Lastly, on April 15, Filecoin changed its supply economics, reducing its daily issuing from 648,000 FIL per day to 365,000. The drastic cut likely led to a perception of scarcity for the token. In turn, it may have caused retail investors and miners to accelerate their investments ahead of the event.

Data shows retail activity has been picking up

Perpetual futures contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours to ensure no exchange risk imbalances.

Whales, arbitrage desks, and market makers avoid exposure to these instruments due to their variable funding rates. When longs (buyers) demand more leverage, they are the ones paying the fee. The opposite holds when shorts (sellers) use more leverage, thus causing a negative funding rate.

*Filecoin (FIL) perpetual futures 8-hour funding rate. Source: Bybt.com*

The above data clearly shows the funding rate surging between Aug. 10 and Aug. 17, and it reached a positive 0.08% average. This number translates to 1.7% per week, indicating increased leverage longs activity. After receding for a couple of days, the indicator initiated another hike to a 0.10% fee charged every 8-hour from longs.

The current 2.1% weekly equivalent fee indicates even stronger leverage from retail traders, which means optimism. Of course, there's no way to know if the recent move will be enough to spark a continuous price improvement, but traders seem to believe $100 is closer than ever.

CFTC commissioner says agency has broad enforcement authority on crypto derivatives

August 23, 2021 Coin Telegraph

bitcoin regulation

"A trading platform that offers derivatives on digital assets to U.S. persons without registering, or in violation of CFTC trading rules, is subject to the CFTC’s enforcement authority," said Dawn Stump.

Dawn Stump, one of four commissioners currently serving at the Commodity Futures Trading Commission, or CFTC, has released a statement clarifying the agency's authority with respect to digital assets.

In a Monday statement, Stump said the CFTC is empowered with both regulatory and enforcement authority for commodities. She did not specifically say that digital assets were cash-like commodities in the eyes of the regulatory body, but “even if a digital asset is a commodity, it is not regulated by the CFTC.” However, according to the commissioner, the agency is within its power to regulate derivatives on digital assets, “such as the futures contracts on Bitcoin and Ether listed for trading on various CFTC-regulated exchanges.”

U.S. government agencies including the CFTC, Securities and Exchange Commission, or SEC, and the Financial Crimes Enforcement Network, or FinCEN, are largely responsible for handling digital asset regulation and enforcement in the country. However, each has different jurisdictional claims regarding crypto, often leading to confusion for companies trying to operate within the law.

According to the commissioner, the CFTC should analyze a digital asset already considered a security — and would thus fall under the SEC’s regulatory umbrella — to determine where the agency’s regulatory authority would lie for a derivatives product for that same project. However, she clarified that the CFTC had enforcement authority over financial products that it currently regulates.

“A trading platform that offers derivatives on digital assets to U.S. persons without registering, or in violation of CFTC trading rules, is subject to the CFTC’s enforcement authority,” said Stump. “That was the case in the recent CFTC enforcement action against BitMEX, and the CFTC has brought similar such actions dating back to 2015.”

She added:

"To determine the CFTC’s regulatory authority with respect to a digital asset, ask not whether the digital asset is a commodity or a security — ask whether a futures contract or other derivatives product is involved."

In the case of BitMEX, the crypto derivatives exchange agreed to pay $100 million as part of a settlement with both the CFTC and the FinCEN. However, the regulatory agency is also reportedly looking into Binance Holdings Limited for possible derivatives trades made by U.S.-based customers, and previously filed charges against the Laino Group for soliciting investors on Bitcoin (BTC), Ether (ETH), and Litecoin (LTC) futures trading without proper registration.

While Stump has taken a position that seems to relegate many cryptocurrencies to the SEC’s regulation and enforcement, she is only one of four voices — usually six — on the panel regulating commodities. Commissioner Brian Quintenz, a seemingly pro-crypto advocate in the CFTC, reportedly plans to step down at the end of August.

Derivatives data shows pro traders turning bullish on EOS price

August 23, 2021 Coin Telegraph

Block.one

Retail traders turned their backs on EOS, but derivatives data shows pro traders maintaining a bullish perspective for the short-term.

EOS rallied in May after Block.one, a blockchain software firm, announced a $10 billion funding round to build an EOS-based crypto exchange platform called Bullish. The EOSIO development company revealed that it had raised capital from Peter Thiel and Mike Novogratz, as well as hedge fund managers Alan Howard and Louis Bacon.

In light of the 'bullish' news, the recent $6 local top stands 60% below the $15 high reached on May 12, and this leaves investors with little reason to celebrate. At the moment, retail traders are not comfortable using leverage for bullish positions and professional traders have been neutral-to-optimistic since mid-July.

*EOS price in USD at Kraken. Source:* *TradingView*

Analysts also pointed to a May 2 report commissioned by Block.one that suggested an increase in the inflation rate from 1% to somewhere between 1.2% and 3.8%. The new issuance rate would be necessary to increase financial incentives for voters and block producers.

However, the lack of deliveries and partnerships caused EOS to quickly lose steam, and the price fell to a low at $3.04 on June 22. The bearish trend ended on June 23, as the little-known 'Bullish' exchange said it would be going public on the New York Stock Exchange via a special-purpose acquisition company, or SPAC.

A positive and lasting trend initiated as the 'Bullish' exchange released its private alpha version on July 27 and promised a full launch later in 2021. The project also mentioned that it would have spot trading, margin trading, and liquidity pools.

Finally, on Aug. 19, EOS announced free access to live pricing data using real-time market information provided by AlgoTrader. The Swiss-based startup oracle includes multiple assets from various exchanges and can create synthetic instruments, derivatives, and stablecoins.

Retail traders were momentarily bullish

To understand whether traders are leaning bullish as EOS price holds the $5 support, one should analyze the perpetual contracts futures data. This is the retail traders' preferred leverage instrument because its price usually perfectly tracks the regular spot markets. There is also no need to manually roll over contracts nearing expiry, as required on quarterly futures.

In any futures contract, trade longs (buyers) and shorts (sellers) are matched at all times, but their leverage varies. Consequently, exchanges will charge whichever side is using more leverage at a funding rate to balance their risk, and this fee is paid to the opposing side.

Neutral markets tend to display a 0% to 0.03% positive funding rate, equivalent to 0.6% per week, indicating that longs are the ones paying it.

*EOS perpetual futures 8-hour funding rate. Source: Bybt.com*

Data reveals a modest excitement building up from Aug. 8, which lasted less than 10 days. The positive funding rate shows that longs (buyers) were the ones paying the fees, but the movement seems reactive to the price increase and faded as EOS failed to breach the $6 resistance.

Data shows pro traders have a bullish bias

It is also useful to analyze the premium quarterly futures contracts, as whales and arbitrage desks trade such instruments more frequently. In the fixed-month contracts, eventual demand imbalances are reflected by a price difference versus regular spot markets.

Healthy markets should display a 0.5% to 1% premium, which is equivalent to 3% to 6% annualized. If the futures contract's premium is nonexistent, it is a bearish indicator because investors are not comfortable creating long positions using leverage.

*EOS Sept. futures contracts premium at FTX. Source:* *TradingView*

There has been no change in the 6% annualized premium this time despite EOS's price movement. However, data shows that professional traders have been slightly bullish since mid-July, while retail traders were primarily flat apart from a brief 10-day period.

Although it remains unclear how the 'Bullish' exchange launch might impact the price of EOS, derivatives indicate that whales and arbitrage desks positively reacted to the news and have kept the bullish stance ever since.

Pendle Finance Launches Support For LP Derivatives

August 19, 2021 The Crypto Briefing

Cryptocurrency derivatives market shows growth despite regulatory FUD

August 17, 2021 Coin Telegraph

Bitcoin Price

The cryptocurrency derivatives market will continue to flourish in 2021 despite the regulatory crackdown on the sub-ecosystem.

The cryptocurrency market has successfully rebounded from the two-month slump it had gone into from late May to the end of July. Bitcoin (BTC) and Ethereum (ETH) have been leading the charge, posting impressive gains over the last two weeks. The market is seeing price levels that it had reached back in May of this year.

Along with the price gains, the cryptocurrency derivatives market that includes financial instruments like futures, options and even micro futures are also seeing rejuvenated interest from investors. According to data from Bybt, The open interest (OI) in Bitcoin options across all the global exchanges offering the product has more than doubled from the yearly low of $3.63 billion on June 26, hitting a 90 day high of $7.86 billion on Aug. 14.

Cointelegraph discussed this spike in OI with Shane Ai, head of product R&D at Bybit, a cryptocurrency derivatives exchange, who said: “The rise in Option OI is mostly driven by institutional players, and the rising popularity of third-party OTC platforms has facilitated easier execution of multi-legged strategies with deeper liquidity — which are prerequisites for more institutional participation.” Data from on-chain analytics provider CryptoQuant also reveals that institutions are buying BTC in the same manner as they did back in late 2020.

A similar spike in growth is seen in the metrics of the Ether options market as well. The OI in Ether Options jumped 75% from $2.42 billion on 30 July to hit a two-month high of $4.26 billion on Aug. 14. This puts the year-on-year (YoY) growth for this market at 846%.

Notably, the crypto derivatives market is still in the nascent stages of its development, as it only sprung into existence in Q2 2020. Even global investment banking giant Goldman Sachs announced their plans earlier in June to expand its foray into the cryptocurrency markets with Ether options.

CME data reveals strong growth in 2021

The growth is seen even in the crypto derivatives products offered by the Chicago Mercantile Exchange (CME), the world’s largest derivatives exchange. CME is often considered to be a benchmark for institutional interest. Currently, they have four crypto derivatives offerings, Bitcoin Futures, Ether Futures, Micro Bitcoin Futures and Bitcoin Options.

According to the data provided by CME, as of Aug. 11, the average daily volume (ADV) in their Bitcoin futures has grown nearly 30% from 8,231 contracts year to date in 2020 to 10,667 contracts year to date in 2021. In the same duration, the open interest for these futures grew by 18.6% to 8,988 contracts year to date in 2021.

While CME has been offering their BTC futures and options since 2017 and 2020, respectively, the exchange launched both their Ether futures and Micro BTC futures earlier this year in February and May.

Since their launch on Feb. 8, CME Ether futures have had an ADV of 2,864 contracts with open interest averaging at 2,436 contracts. A record volume of 11,980 contracts was traded on May 19, and a record OI of 3,977 contracts on June 1.

In the case of CME Micro BTC Futures, they have had an ADV of 21,667 contracts with their OI averaging at 19,990 contracts. This product is designed to enable even retail investors to manage their Bitcoin price risk. Its size is 1/10th that of a Bitcoin and has traded 1.5 million contracts since the launch. An all-time high of 94,770 contracts was traded on May 19 with a record open interest of 38,073 contracts being attained on June 1.

Cointelegraph discussed this growth in the markets with Luuk Strijers, chief commercial officer of crypto derivatives exchange, Deribit who stated:

“We have seen incredible growth in Q1 and Q2 this year showing the potential of derivatives and, in our case specifically, options driven by ever-increasing client demand. We expect this trend to continue as we are onboarding an increasing number of (institutional) clients.”

Organic growth supported by ETH activity

Strijers added that the spike in OI in August was not only due to the rise in price leading to the notional value growing but also due to the expansion of the number of open contracts after the large Q2 expiry for BTC options.

This reveals that the OI growth that the market is currently undergoing is organic and not just a by-product of the notional value rising. He mentioned that this effect was even larger for Ether, adding:

“The latter is explained by the launch of EIP-1559 and the consequence that nearly $100m worth of ETH has been burned since the upgrade. Furthermore, the NFT hype results in a lot of people buying NFTs, using their ETH and buying upside calls instead to avoid missing out on the potential upside.”

The Ethereum network finally underwent the London upgrade on Aug. 5 which ushered in the much anticipated Ethereum Improvement Proposal (EIP) 1559 that changes the transaction pricing mechanism for the network and the management of the fees. Strijers opined on how the London hard fork impacted the upwind for ETH, saying, “The market seems to appreciate the London fork changes. A lot of ETH was already locked in smart contracts or staked, and now the supply is getting even more scarce due to the gas burn mechanism, driving prices upwards.”

Ai mentioned more on the specific impact of the hard fork on the ETH derivatives market, saying that the ETH IV term structure has gone into contango (a scenario where the futures price of the asset is higher than the spot price), alongside steeper call-put skews as trends further in time are observed. Steeper skews could often indicate higher prices for Out of the Money (OTM) put options and lower prices for OTM call options.

Several players in the industry are innovating with automated solutions to simplify Bitcoin options trading for retail investors. Delta exchange, a crypto derivatives platform, recently launched automated trading under the product name “Enhanced Yield” for BTC, ETH and Tether (USDT).

Regulators frown on derivatives trading

Despite the immense growth of the crypto derivatives market, or rather because of it, regulatory authorities are often known to be skeptical of the sector. In the recent past, various organizations have extended their cautionary warnings to curbing actions for players offering these financial instruments in the market.

In a very public settlement, BitMEX has agreed to pay $100 million to the United States Commodities Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN) to put a case filed in the U.S. District Court on Oct. 1, 2020, to rest. The CFTC charged BitMEX owners with “illegally operating a cryptocurrency derivatives platform” and Anti-Money Laundering (AML) violations.

In another instance of regulatory bodies increasing their scrutiny on the derivatives trading sub-ecosystem, global cryptocurrency exchange Binance has announced that they will be shutting down derivatives trading in the European region, beginning with Germany, Italy and the Netherlands. In addition to the EU region, Binance has also announced that they would be restricting access to derivatives products for its users in Hong Kong. CEO Changpeng Zhao mentioned that it was a measure to establish “crypto compliance best practices worldwide.”

Early in January this year, the United Kingdom’s Financial Conduct Authority (FCA) banned crypto exchanges from selling crypto derivatives and exchange-traded notes (ETNs) to retail consumers. The regulatory authority cited the reason for this ban as that these products are “ill-suited for retail consumers due to the harm they pose.”

Despite regulatory organizations cracking down on crypto derivatives, the futures and options markets have continued to show immense growth this year. A report by Inca Digital revealed that hundreds of traders in the U.S. are evading local regulations and trading crypto derivative assets on exchanges like FTX and Binance. These platforms have official U.S. counterparts that don’t offer derivatives products on their platform due to regulatory concerns.

However, Brett Harrison, president of FTX.US, the U.S. counterpart of FTX, recently stated that the platform aims to offer crypto derivatives trading in the U.S. in less than a year. Harrison also mentioned that as institutional investors are responsible for nearly 70% of the trading volume of FTX.US, their current aim is to grow their retail base in the country.

This reasoning could be the driving force behind the exchange’s recent decision to hire Kevin O’Leary — aka Mr. Wonderful of Shark Tank fame — as the brand ambassador and official spokesperson for FTX.

While that could be pure conjecture, the growth of the crypto derivatives market is undeniable and inevitable in the future as the liquidity improves. These instruments that provide hedging and risk solutions are much needed by investors, especially in these times of high volatility.

Bullish Ethereum traders can place risk-averse bets with this options strategy

August 14, 2021 Coin Telegraph

Coin Telegraph

Traders who believe ETH will reach $5,000 can use this low-risk options strategy to cast a long bullish bet.

Being bullish on Ether (ETH) has paid off recently because the token gained 60% in the last 30 days. The spectacular growth of decentralized finance (DeFi) applications likely fueled inflow from institutional investors, and the recent London hard fork implemented a fee burn mechanism that drastically reduced the daily net issuance.

Although Ether is not yet a fully deflationary asset, the upgrade paved the way for Eth2, and the network is expected to abandon traditional mining and enter the proof-of-stake consensus soon. Ether will then be slightly deflationary as long as fees remain above a certain threshold and the level of network staking.

In light of the recent rally, there are still daily calls for Ether to rally above $5,000, but surely even the most bullish investors know that a 90% rally from the current $3,300 level seems unlikely before year-end.

It would seem more prudent to have a safety net if the cryptocurrency market reacts negatively to the potential regulation coming from the United States Representative Don Beyer of Virginia.

Despite being in its early stages, the "The Digital Asset Market Structure and Investor Protection Act of 2021" proposal seeks to formalize regulatory requirements for all digital assets and digital asset securities under the Bank Secrecy Act, classifying both as "monetary instruments."

Reduce your losses by limiting the upside

Considering the persistent regulatory risks that exist for crypto assets, finding a strategy that maximizes gains up to $5,000 by year-end while also simultaneously limiting losses below $2,500 seems like a prudent and well-aligned decision that would prepare investors for both scenarios.

There's no better way to do this than using the "Iron Condor" options strategy that has been slightly skewed for a bullish outcome.

*Ether options Iron condor skewed strategy returns. Source: Deribit Position Builder*

The call option gives the buyer the right to acquire an asset at a fixed price in the future. For this privilege, the buyer pays an upfront fee known as a premium. Selling a call option, on the other hand, creates a negative exposure to the asset price.

The put option provides its buyer the privilege to sell an asset at a fixed price in the future, a downside protection strategy. Meanwhile, selling this instrument offers exposure to the price upside.

The iron condor basically sells both the call and put options at the same expiry price and date. The above example has been set using the ETH December 31 options at Deribit.

The max profit is 2.5x larger than the potential loss

The buyer would initiate the trade by simultaneously shorting (selling) 0.50 contracts of the $3,520 call and put options. Then, the buyer needs to repeat the procedure for the $4,000 options. To protect from extreme price movements, a protective put at $2,560 has been used. Consequently, 1.47 contracts will be necessary depending on the price paid for the remaining contracts.

Lastly, just in case Ether's price rips above $7,000, the buyer will need to acquire 0.53 call option contracts to limit the strategy's potential loss.

Although the number of contracts on the above example aims for a maximum ETH 0.295 gain and a potential ETH 0.11 loss, most derivatives exchanges accept orders as low as 0.10 contracts.

This strategy yields a net gain if Ether trades between $2,774, which is 10.5% below the current $3,100 price, and $5,830 on December 31.

By using the skewed version of the iron condor, an investor can profit as long as the Ether price increase is lower than 88% by year-end.

Ethereum price drops below $3K, but ETH options data reflects optimism

August 12, 2021 Coin Telegraph

Ethereum price drops below K, but ETH options data reflects optimism

Coin Telegraph

$430 million in ETH options expire on Friday and derivatives data shows that bulls are in control and planning to push prices higher in the short term.

Ether's (ETH) 81% rally over the last three weeks caught professional traders off-guard, and this week's upcoming options expiry reveals that of the $430 million in contracts set to expire, only 7% of the neutral-to-bearish put options will be available if Ether holds above $3,200 on Aug. 13.

*Ether price in USD at Coinbase. Source:* *TradingView*

Curiously, the crypto market is holding its recent strength despite the Senate's 'crypto-critical' infrastructure deal that recently passed. Although the $1 trillion infrastructure bill may encounter some lengthy hangups in the House of Representatives, the approved version did not clarify what constitutes a cryptocurrency broker, and this is expected to harm the industry in the future.

Institutional investors were likely behind the recent rally

Institutional investors' adoption continues to increase and this week Neuberger Berman, a New York-based investment management firm, filed for a commodity-focused fund. The $164 million commodity strategy fund plans to gain crypto exposure using trusts and exchange-traded funds.

Furthermore, Coinbase exchange reported that 10 out of the top 100 largest hedge funds in terms of assets under management are clients of the platform. Even more interesting for Ether supporters was the 'flippening' that occurred as the exchange traded more Ether volume than Bitcoin (BTC) in the second quarter of 2021.

Coinbase cited the emergence of new use cases, including decentralized finance (DeFi), non-fungible tokens (NFT) and smart contracts as the reason for the high Ether volumes. Whatever the case was that fueled Ether price, bulls now enjoy a vast advantage leading into Friday's options expiry.

*Ether Aug. 13 options aggregate open interest. Source: Bybt.com*

Open interest shows an apparent balance between calls and puts

The initial view shows a reasonable balance between the neutral-to-bullish call options and the protective puts, which indicates that bulls lacked the confidence to bet on the recent rally.

Moreover, more than half of the bets have been placed between $2,100 and $2,900. This data clearly shows that professional traders weren't expecting a rally above $3,000.

The result is a meager $2 million of protective puts that will participate in Friday's option if Ether holds above $3,200. This number increases to $19 million if bears manage to push the price below $3,100, and it rises to $27 million if Ether trades below $3,000 on Aug. 13.

Bulls currently lead by $165 million

$167 million of the call (buy) options have been placed at $3,200 or lower. The net result would then be a $165 million advantage for this neutral-to-bullish instrument. This gap will be reduced to $120 million if bulls fail to hold the $3,100 support.

A 10% negative move from the $3,200 price would reduce the neutral-to-bullish instrument advantage to a comfortable $90 million. Thus, there's no reason to believe that bears will try to pressure the price solely due to Friday's options expiry.

Currently, the bulls have complete control and will likely use their profits to create additional bullish bets for the upcoming weeks.

Switzerland’s Leonteq Offers Crypto Assets to Investors in Germany and Austria

August 12, 2021 Bitcoin.com

derivatives

Bears might be analyzing different data

91% of the put options will probably be worthless at expiry

China-based mining activity boosted investors' expectations

New smart contract capabilities are expected and FIL's daily issuance was cut

Data shows retail activity has been picking up

Retail traders were momentarily bullish

Data shows pro traders have a bullish bias

CME data reveals strong growth in 2021

Organic growth supported by ETH activity

Regulators frown on derivatives trading

Reduce your losses by limiting the upside

The max profit is 2.5x larger than the potential loss

Institutional investors were likely behind the recent rally

Open interest shows an apparent balance between calls and puts

Bulls currently lead by $165 million

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