SEC again delays decision on spot Ethereum ETF options

October 11, 2024 Coin Telegraph

Ethereum price metrics hint that ETH might not sell-off after the Shapella hardfork

April 12, 2023 Coin Telegraph

ETH traders are exercising caution ahead of the April 12 Shapella hardfork, but the signal to watch is staking unlock requests.

Ether (ETH) price has increased by 58% year to date, but it has far underperformed the market leader Bitcoin (BTC). In fact, the ETH/BTC price ratio has dropped to 0.063, its lowest level in 9 months.

Analysts believe that the majority of the movement can be attributed to the Ethereum network's upcoming Shapella hard fork, which is scheduled for April 12 at 10:27 p.m. UTC.

*Ether / Bitcoin price ratio at Binance. Source: TradingView*

The Ethereum network upgrade will allow stakers to unlock their Ether rewards or stop staking entirely. By April 11, over 170,000 ETH withdrawals were requested, according to the analytics firm Glassnode. However, the total staked on the Beacon Chain exceeds 18.1 million ETH, which has traders fearful until more information on ETH’s potential selling pressure becomes available.

Is the price impact of the Shapella fork already priced in?

The staking unlock was widely known and expected, so traders could have anticipated the movement. Some analysts have gone so far as to call the hard fork a "buy the news" event.

Literally everyone: “Ethereum Shanghai is a buy the news event because everyone thinks it is a sell the news event” pic.twitter.com/TpyL1TDnPj
— HORSE (@CanteringClark) April 9, 2023

Using a meme, trader @CanteringClark is likely expressing dissatisfaction with the theory, but to invalidate the hypothesis, one must investigate potential reasons for ETH’s underperformance other than the much anticipated hard fork.

For starters, the Ethereum network's average transaction fee has been above $5 for the past five weeks and the Shapella fork does not address the issue, despite minor improvements. This alone lowers the chances of a bullish breakout following the upgrade, as most decentralized applications (Dapps) and projects will continue to prefer second layer and competing networks.

Furthermore, volume at Ethereum-based decentralized exchanges (DEX) have fallen by 84% since a weekly peak of $38.2 billion on March 5. The most recent data for the week ending April 2 was $6.4 billion, according to DeFiLlama. In the same period, competing blockchains saw 60% lower volumes on average, a sign that Ethereum lost market share.

According to Paul Brody, EY's global blockchain leader, one reason for Ether's price underperformance relative to Bitcoin could be "the battle to keep Ethereum sufficiently and properly decentralized." Brody cites exchanges as highly centralized custodial validators, as well as some semi-centralized players and staking pool operations that invest funds from tens of thousands of individual crypto wallets.

Ether derivatives display balanced bets between bulls and bears

Let's examine Ether derivatives metrics to determine the current market position of professional traders. For example, the open interest in Ether options for the weekly expiry on April 14 is $510 million, with neutral-to-bullish call instruments outnumbering protective put options by 36%.

Those ETH options bulls could come up empty-handed because 60% of their bets were placed at $2,000 or higher. As a result, if Ether's price remains between $1,800 and $1,900 on April 14 at 8:00 a.m. UTC, the outcome is balanced between call and put options. Furthermore, an expiry price between $1,900 and $2,000 represents a mere $100 million advantage for bulls, which is unlikely to justify the cost of a price pump.

Futures markets should also be examined to determine whether the Shapella hard fork has caused investors to become more risk-averse. Ether quarterly futures are popular among whales and arbitrage desks, and they typically trade at a slight premium to spot markets, indicating that sellers are requesting more money to postpone settlement.

As a result, futures contracts in healthy markets should trade at a 5% to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

*Ether 3-month futures annualized premium. Source: Laevitas.ch*

The premium on Ether futures is currently 2%, down from 4% the previous week. Despite being below the 5% neutral threshold, it shows no excessive short demand.

Traders should monitor staking unlock requests

Based on Ether derivatives, there is no reason to believe professional traders expect a significant price correction as a result of the staking unlock. Nonetheless, given the high transaction fees and declining DEX activity, the chances of a "buy the news" event are slim.

Professional traders would have used derivatives instruments to bet against Ether's price because the event was widely publicized, which hasn't happened given the ETH futures' premium. There are no obvious reasons for a rally, but derivatives traders do not anticipate any panic selling. So, unless the number of staking unlock requests significantly increases, Ether should remain near $1,900 for the foreseeable future.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Ethereum needs to defend $1,180 to sustain this 50-day ascending pattern

December 30, 2022 Coin Telegraph

Ethereum needs to defend ,180 to sustain this 50-day ascending pattern

Coin Telegraph

ETH price bulls struggle as futures remain trading below its fair value, signaling excessive demand for shorts.

Ether (ETH) has been ranging near $1,200 since Dec. 17, but an ascending trend has been quietly gaining strength after 50 consecutive days.

The pattern points to $1,330 or higher by March 2023, making it essential for bulls to defend the current $1,180 support.

*Ether/USD 1-day candle chart. Source: TradingView*

The anxiously awaited migration to a Proof of Stake in September 2022 paved the way for additional layer-2 integration and lower transaction costs overall. Layer-2 technologies such as Optimistic Rollups have the potential to improve Ethereum scalability by 100x and provide off-chain network storage.

Developers anticipate that the network upgrades scheduled for 2023 introducing large portable data bundles can boost the capacity of rollups by up to 100x. Moreover, in December 2021, Vitalik Buterin shared that the end game was for Ethereum to act as a base layer, with users "storing their assets in a ZK-rollup (zero knowledge) running a full Ethereum Virtual Machine."

An unexpected move negatively affecting the competing smart chain platform Solana (SOL) has likely helped to fuel Ethereum investors' expectations.

Two noticeable non-fungible token projects announced on Dec. 25 an opt-in migration to Ethereum and Polygon chains, namely eGods and y00ts. The transition will also bridge the DUST token — used to buy, sell and mint NFTs on the DeGods ecosystem — via Ethereum and Polygon.

Still, investors believe that Ether could revisit sub-$1,000 levels as the U.S. Federal Reserve continues to push interest rates higher and drain market liquidity. For example, trader and investor Crypto Tony expects the next couple of months to be extremely bearish to ETH:

$ETH / $USD - Update

I am 90% confident in another drop down to below $1,000 and remain in my short from the range high while below $1,280

Now the path we take to get to sub $1,000 can take a few approaches, including a pump first. So be prepared and use strict risk management pic.twitter.com/Rc1nVQG5Ql
— Crypto Tony (@CryptoTony__) December 29, 2022

Let's look at Ether derivatives data to understand if the bearish macroeconomic scenario has impacted investors' sentiment.

Excessive demand for bearish bets using ETH futures

Retail traders usually avoid quarterly futures due to their price difference from spot markets. Meanwhile, professional traders prefer these instruments because they prevent the fluctuation of funding rates in a perpetual futures contract.

The two-month futures annualized premium should trade between +4% to +8% in healthy markets to cover costs and associated risks. When the futures trade at a discount versus regular spot markets, it shows a lack of confidence from leverage buyers, which is a bearish indicator.

*Ether 2-month futures annualized premium. Source: Laevitas.ch*

The chart above shows that derivatives traders continue to demand more leverage for short (bear) positions as the Ether futures premium remains negative. Yet, the absence of leverage buyers' appetite does not necessarily mean that a price drop is guaranteed.

For this reason, traders should analyze Ether's options markets to understand whether investors are pricing higher odds of surprise adverse price movements.

Ethereum ptions traders remain risk-averse

The 25% delta skew is a telling sign when 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 indicator below -10%, meaning the bearish put options are discounted.

*Ether 60-day options 25% delta skew: Source: Laevitas.ch*

The delta skew peaked on Dec. 24, signaling moderate fear as the protective put options traded at a 22% premium. However, the movement gradually faded to the current 17% level, indicating options traders remain uncomfortable with downside risks.

The 60-day delta skew confirms that whales and market makers are not confident that the $1,180 support will hold.

In a nutshell, both options and futures markets suggest that investors are prepared for sub-$1,000 prices. As long as the U.S. Federal Reserve maintains its contractive economic policies, bears will likely successfully suppress future Ethereum price rallies.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Ethereum rallies to $1,350, but derivatives metrics remain neutral to bearish

December 13, 2022 Coin Telegraph

Ethereum rallies to ,350, but derivatives metrics remain neutral to bearish

Binance

Pro traders aren’t buying ETH’s recent rally to $1,350 and data shows they expect Ether price to retrace if Fed chair Powell takes a hawkish tone on Wednesday.

Ether (ETH) rallied 6.3% to $1,350 on Dec. 13, mimicking a similar failed attempt that took place on Nov. 10. Despite reaching the highest level in 33 days, the gains were not enough to instill confidence in traders according to two key derivatives metrics.

*Ether/USD price index, 12-hour. Source: TradingView*

Bulls' frustrations can partially be explained by Binance exchange facing a near-record $1.1 billion in withdrawals over a 24-hour period. The unusual behavior comes as Binance attempts to put out multiple disputes about its proof of reserves and overall solvency on crypto Twitter. According to Binance CEO, Changpeng Zhao, the social media posts amount to nothing more than FUD.

However, Binance's USD Coin (USDC) reserves were emptied after alleged troubles with commercial banking hours.

The negative newsflow continued on Dec. 13, as the United States Securities and Exchange Commission (SEC) filed charges against Sam Bankman-Fried, the former CEO of now-bankrupt FTX crypto exchange. The fresh charges come just a day after his arrest by Bahamian authorities at the request of the U.S. government.

On Dec. 13, the United States Commodity Futures Trading Commission (CFTC) also filed a lawsuit against Sam Bankman-Fried, FTX and Alameda Research, claiming violations of the Commodity Exchange Act and it demanded a jury trial.

Traders are relieved that Ether is trading above the $1,300 level, but the rebound has been mostly driven by the Consumer Price Index (CPI) print for November at 7.1% year-on-year, which was a tad bit softer than expected. More importantly, the U.S. Federal Reserve (FED) is expected to decide on the interest rate hike on Dec. 14 and analysts expect the size of rate hikes to decline now that inflation appears to have peaked.

Consequently, investors believe that Ether could retrace its recent gains if comments Federal Reserve Chair Jerome Powell take a hawkish angle, a point highlighted by trader CryptoAceBTC:

Liquidity is low in market
And retracing quickly is only way to bring in buyers and sellers

I think Fed meet will be Hawkish and price will retrace this CPI pump

Bitcoin $18k $18.5k resistance
ETH $1350-$1400
Will wait for Fed meet to load shorts
— Cryptoce (@CryptoAceBTC) December 13, 2022

Let's look at Ether derivatives data to understand if the surprise pump positively impacted investors' sentiment.

The rally to $1,300 had a limited impact on confidence

The chart above shows that derivatives traders remain in "fear mode" because the Ether futures premium is below 0%, indicating the absence of leverage buyers' demand. Still, such data does not signal traders expect further adverse price action.

For this reason, traders should analyze Ether's options markets to understand whether investors are pricing higher odds of surprise negative price movements.

Options traders were on the verge of turning neutral

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

The delta skew improved considerably between Dec. 7 and Dec. 11, declining from a fearful 16% to a neutral balanced-risk options pricing at 9.5%. The movement signaled that options traders were more comfortable with downside risks. However, the situation changed on Dec. 13 after Ether failed to break the $1,350 resistance.

As the 60-day delta skew stands at 14%, whales and market makers are reluctant to offer downside protection, which seems odd, considering ETH is trading at the highest level in 32 days. Both options and futures markets point to pro traders fearing that the $1,300 resistance will not hold ahead of the FED meeting.

Currently, the odds favor Ether bears because the FTX exchange bankruptcy increased the possibility of stricter regulation and brought discomfort to cryptocurrency investors.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Ether tests $1,200 but bears better positioned for $1.13B options expiry on Nov. 25

November 24, 2022 Coin Telegraph

Ether tests ,200 but bears better positioned for .13B options expiry on Nov. 25

Aave

Bears are better positioned to profit roughly $215 million during November's Ether options expiry, putting pressure on ETH's price near a critical resistance level.

No matter if one analyzes Ether's (ETH) longer-term or weekly time frame, there is little hope for bulls. Besides the negative 69% year-to-date performance, a descending channel has been pressuring the ETH price while offering resistance at $1,200.

*Ether/USD 4-hour price index. Source: TradingView*

Regulatory uncertainty continues to weigh down the sector. For example, Starling, a digital bank based in the United Kingdom, announced on Nov. 22 that it would no longer allow customers to send or receive money from digital asset exchanges or merchants. The bank described cryptocurrencies as "high risk and heavily used for criminal purposes."

Other concerning news for the Ethereum ecosystem involved the decentralized finance (DeFi) platform AAVE, which suffered a short-seller attack on Nov. 22 aimed to profit from under-collateralized loans.

Curiously, a similar exploit happened on the Mango Markets DeFi application in October. Albeit not a direct attack on the Ethereum network, the attacker has shown critical flaws in some major decentralized collateral lending applications.

Furthermore, the Singapore-based cryptocurrency lender Hodlnaut is reportedly facing a police probe over allegations of cheating and fraud. The issues started on Aug. 8 after the lending firm cited a liquidity crisis and suspended withdrawals on the platform.

Lastly, on Nov. 22, United States senator Elizabeth Warren correlated the demise of the FTX exchange to subprime mortgages of 2008 and penny stocks used for pump-and-dump schemes. Warren said the FTX collapse should be a "wake-up call" to regulators to enforce laws on the crypto industry.

That is why the $1.13 billion Ether monthly options expiry on Nov. 25 will put a lot of price pressure on the bulls, even though ETH posted 11% gains between Nov. 22-24.

Most of the bullish bets were placed above $1,400

Ether's rally toward the $1,650 resistance on Nov. 5 gave the bulls the signal to expect a continuation of the uptrend. This becomes evident because only 17% of the call (buy) options for Nov. 25 have been placed below $1,400. Consequently, Ether bears are better positioned for the monthly expiry of the upcoming $1.13 billion options.

*Ether options aggregate open interest for Nov. 25. Source: CoinGlass*

A broader view using the 1.44 call-to-put ratio shows a skewed situation with bullish bets (calls) open interest at $665 million versus the $460 million put (sell) options. Nevertheless, with Ether currently hovering around $1,200, bears have a dominant position.

For instance, if the Ether price remains below $1,250 at 8:00 am UTC on Nov. 25, only $40 million worth of these call (buy) options will be available. This difference happens because there is no use in the right to buy Ether at $1,250 or $1,500 if it trades below that level on expiry.

Bears could pocket a $215 million profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on Nov. 25 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $1,050 and $1,150: 800 calls vs. 20,200 puts. The net result favors bears by $215 million.
Between $1,150 and $1,250: 3,300 calls vs. 15,100 puts. The net result favors bearish bets by $140 million.
Between $1,250 and $1,300: 4,700 calls vs. 13,200 puts. The net result favors bears by $100 million.
Between $1,300 and $1,400: 8,700 calls vs. 8,900 puts. The net result is balanced between bulls and bears.

This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

A 7-year-old dormant Bitcoin wallet could complicate matters for Ether bulls

Ether bulls need to push the price above $1,300 on Nov. 25 to balance the scales and avoid a potential $215 million loss. However, Ether bulls seem out of luck since a Bitcoin wallet related to the 2014 Mt. Gox hack moved 10,000 BTC on Nov. 23.

Ki Young Ju, the cofounder of blockchain analytics firm Cryptoquant, has verified the findings, noting 0.6% of the funds were sent to exchanges and may represent sell-side liquidity.

If bears dominate the November ETH monthly options expiry, that will likely add firepower for further downside bets. Thus, at the moment, there is no indication that bulls can turn the tables and avoid the pressure from the two-week-long descending triangle.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin Options Giant Deribit Loses $28 Million in Hot Wallet Hack

November 2, 2022 Bitcoin.com

This bullish Ethereum options trade targets $3.1K ETH price with zero liquidation risk

February 5, 2022 Coin Telegraph

This bullish Ethereum options trade targets .1K ETH price with zero liquidation risk

Coin Telegraph

The crypto market is starting to turn around, raising opportunities for risk averse traders to use the Long Condor options strategy to long ETH.

Ether price (ETH) spent the last two months stuck in a rut and even the most bullish trader will admit that the possibility of trading above $4,400 in the next couple of months is dim.

Of course, cryptocurrency traders are notoriously optimistic and it is not unusual for them to expect another $4,870 all-time high, but this seems like an unrealistic outcome.

Despite the current bearish trend, there are still reasons to be moderately bullish for the next couple of months and using a “long condor with call options” strategy might yield a positive outcome.

Options strategies allows the investor to set upside limits

Options markets provide more flexibility to develop custom strategies and there are two instruments available. The call option gives the buyer upside price protection, and the protective put option does the opposite. Traders can also sell the derivatives to create unlimited negative exposure, similar to a futures contract.

*Ether options strategy returns. Source: Deribit Position Builder*

This long condor strategy has been set for the March 25 expiry and uses a slightly bullish range. The same structure can also be applied for bearish expectations, but this scenario assumes that most traders are looking for upside.

Ether was trading at $2,677 when the pricing took place, but a similar result can be achieved starting from any price level.

The first trade requires buying 5.14 ETH worth of $3,000 call options to create a positive exposure above this price level. Then, to limit gains above $3,500 the trader needs to sell 4.4 ETH contracts of the $3,500 call.

To complete the strategy, the trader needs to sell 6.65 ETH contracts of the $4,000 call, limiting the gains above such a price level. Lastly, a $4,500 upside protection call for 5.91 ETH is needed to limit the losses if Ether unexpectedly skyrockets.

The strategy aims for a healthy 3.2 to 1 profit to loss ratio

The strategy might sound complicated to execute, but the margin required is only 0.175 ETH, which is also the max loss. The potential net profit happens if Ether trades between $3,100 (up 15%) and $4,370 (up 63%).

Traders should remember that it is also possible to close the position ahead of the March 25 expiry. In this strategy, the maximum gain occurs between $3,500 and $4,000 at 0.56 Ether, which is more than three times higher than the potential loss.

Unlike futures trading, this strategy gives the holder peace of mind because there is no liquidation risk. It is also worth noting that most derivatives exchanges accept orders as low as 0.10 ETH contracts, meaning a trader could build the same strategy using a smaller amount.

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.

Ethereum futures and options data reflects traders’ mixed emotions on $3.2K ETH price

January 11, 2022 Coin Telegraph

Ethereum futures and options data reflects traders’ mixed emotions on .2K ETH price

CBDC

ETH’s futures markets are slightly bearish, but options traders appear to be interpreting the rally to $3,200 as a bottoming signal.

Ether (ETH) has been an emotional rollercoaster over the past three months primarily because its price rallied twice. First, it peaked at $4,870 on Nov. 10 and at $4,780 on Dec. 1. However, the double top was quickly followed by a harsh rejection, which led to $490 million in long futures contract liquidations in 48 hours.

Once again, hope was instilled on Dec. 8 after Ether commenced to rally 28.5% in four days to retest the $4,400 support. Soon after, the downtrend continued, leading to the $2,900 bottom on Jan. 10, which was the lowest ETH price seen in 102 days. This low marked a 40% low from the $4,870 all-time high and caused traders to question whether a bear market had been set.

*Ether/USD price at FTX. Source: TradingView*

One might argue that Ether is simply following Bitcoin's 42% correction from the Nov. 10 all-time high at $69,000 and the most recent pullback has partially been attributed to the United States Federal Reserve's potential tighter monetary policies and Kazakhstan's political turmoil impact on mining.

This simplistic analysis leaves behind some crucial developments, such as China's official digital yuan wallet becoming the most downloaded app in local mobile app stores on Jan. 10. Furthermore, a pilot version of the nation’s central bank digital currency (CBDC) is being used in select cities and it also became available for download on app stores on Jan. 4.

Even with the fiscal policy pressure and negatively skewed price action, traders should still monitor the futures contracts premium (basis rate) to analyze how bullish or bearish professional traders are.

Futures traders are becoming more anxious

The basis indicator measures the difference between longer-term futures contracts and the current spot market levels. A 5% to 15% annualized premium is expected in healthy markets. This price gap is caused by sellers demanding more money to withhold settlement longer.

However, a red alert emerges whenever this indicator fades or turns negative, a scenario known as "backwardation."

*Ether 3-month futures basis rate. Source: Laevitas.ch*

Notice how the indicator peaked at 20% on Nov. 8 as Ether surpassed $4,800, but then gradually faded away to an 8% low on Dec. 5 after ETH flash crashed to $3,480. More recently as Ether touched a $2,900 low on Jan. 10, the basis rate moved to 7%, which is its lowest level in 132 days.

Consequently, professional Ether traders are not comfortable despite the 10% recovery to $3,200 on Jan. 11.

Options traders recently flipped neutral

To exclude externalities specific to the futures instrument, one should also analyze the options markets. The 25% delta skew compares similar call (buy) and put (sell) options. The metric will turn positive when fear is prevalent because the protective put options premium is higher than similar risk call options.

The opposite holds when greed is the prevalent mood causing the 25% delta skew indicator to shift to the negative area.

*Ether 30-day options 25% delta skew. Source: TradingView*

When market makers and whales are bearish, the 25% delta skew indicator shifts to the positive area, and readings between negative 8% and positive 8% are usually deemed neutral.

Ether option traders entered "fear" mode on Jan. 8 as the 25% delta skew surpassed the 8% threshold, peaking at 11% two days later. However, the quick bounce from the $2,900 low instilled confidence in Ether options traders and also moved the options "fear and greed" metric to a meager 3%.

At the moment, there is not a consensus sentiment-wise from Ether traders because futures markets indicate slight discontent and options arbitrage desks and whales have recently abandoned their bearish stance. This makes sense because the current $3,200 price is still reflecting the recent 15% weekly drop and is far from exciting.

Regulatory fears put a damper on Ethereum traders’ $5,000 target

December 2, 2021 Coin Telegraph

Regulatory fears put a damper on Ethereum traders’ ,000 target

Coin Telegraph

This week, ETH price came within 2% of a new all-time high before U.S. lawmakers announced a hearing to discuss stablecoins and the need for eventual regulation.

This week Ether (ETH) price came within 2% of its all-time high, and on Dec. 2 the altcoin reached its highest price in Bitcoin (BTC) terms since May 2018. Ether hitting 0.0835 in its BTC pair represents a 229% gain for 2021, but Ether bulls might come out empty-handed from this Friday’s $680 million options expiry.

*ETH/BTC price at FTX. Source: TradingView*

Notice the ascending channel formation initiated in mid-October, which likely reflects the network’s $177 billion total value locked in smart contracts (TVL). Moreover, Ether's ETH 2.0 beacon chain balance reached an 8.45 million high, which is a 4.5% increase in November.

Last week, four Ethereum blockchain-based metaverse projects generated more than $100 million worth of virtual land in nonfungible token (NFT) sales last week, according to reporting by Cointelegraph.

However, Ether investors might be concerned about the United States Lower House meeting scheduled for Dec. 8 where the committee will focus on "Digital Assets and the Future of Finance.” Stablecoin issuers and exchange CEOs have been invited, so there’s some potential heat coming from the threat of new regulation.

Regardless of the rationale behind ETH’s current 6% ETH price drop, bulls missed the opportunity to secure a $80 profit in Dec. 3 weekly options expiry.

*Ether options aggregate open interest for Dec. 3. Source: Coinglass.com*

A broader view using the call-to-put ratio shows a 19% advantage to bears as the $375 million put (sell) instruments have a larger open interest versus the $305 million call (buy) options. The 0.81 indicator is deceptive because the 49% bull run since September caused most of the bearish bets to become worthless.

For example, if Ether’s price remains above $4,400 at 8:00 am UTC on Dec. 3, only $68 million worth of those put (sell) options will be available. Therefore, there is no value in the right to sell Ether at $4,400 if it is trading above that price.

Bulls are unfazed after today’s 4% price drop

Below are the three most likely scenarios based on the current price action. The number of option contracts available on Dec.3 for bulls (call) and bear (put) instruments vary depending on the expiry ETH price. The imbalance favoring each side constitutes the theoretical profit:

Between $4,300 and $4,500: 11,300 calls vs. 15,400 puts. The net result is balanced.
Between $4,500 and $4,700: 21,700 calls vs. 7,300 puts. The net result is $65 million favoring the call (bull) instruments.
Above $4,700: 26,000 calls vs. 5,000 puts. The net result is $100 million favoring the call (bull) instruments.

This crude estimate considers call options being used in bullish bets and put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

For instance, a trader could have sold a call option, effectively gaining a negative exposure to Ether above a specific price. But, unfortunately, there’s no easy way to estimate this effect.

Bulls need $4,700 to secure a decent-sized profit

Ether bulls need a 4.7% move from $4,500 to $4,700 to score a $100 million profit. On the other hand, bears simply need to keep Ether price below $4,500 to avoid any losses.

As the ETH/BTC chart indicates, there’s some decoupling gaining traction, which might favor Ether holders. Despite the incentives for pushing Ether price above $4,700 ahead of Friday’s expiry, this favourable outcome for bulls seems somewhat distant.

Could bears save this week’s options expiry and avoid a $100 million loss? Possibly.

Ascending channel pattern and Ethereum options data back traders’ $5K ETH target

November 11, 2021 Coin Telegraph

Ascending channel pattern and Ethereum options data back traders’ K ETH target

Coin Telegraph

ETH price dropped to $4,400 during the Nov. 11 correction, but data shows traders expect the altcoin to surpass $5,000 soon.

Ether (ETH) bulls seem excited by the recent $4,870 all-time high that was hit on Nov. 10. While it was a new high in U.S. dollar terms, ETH is still 51% below June 2017’s price in Bitcoin (BTC) terms. But it’s entirely possible that the 0.155 BTC level reached in the previous cycle reflected the overzealous expectations that were rampant during the initial coin offering frenzy.

The Ethereum network’s success has caused congestion and high fees, bringing the competition closer. For example, in mid-2017, the leading “competitors” were Ethereum Classic (ETC) and NEM (XEM). Combined, those represented a mere 13% of Ether’s $37 billion market capitalization.

Today, the aggregate capitalization of Binance Coin (BNB) and Solana’s SOL stand at 32% versus Ether’s $557 billion.

At the moment, Ether is trading in an ascending channel with a target at $5,000, but bears apparently still have reasons to doubt the network’s ability to deliver Eth2 by year-end.

*ETH/USD price on Kraken. Source: TradingView*

This year, Ethereum’s leading use case, decentralized finance (DeFi), has gathered regulators’ attention — and not in a good way. On Nov. 9, United States Securities and Exchange Commission Commissioner Caroline Crenshaw published her opinion in the article titled “DeFi risks, regulations and opportunities.” In it, she mentions that the sector lacks market protections, and she raises concerns about pseudonymity and market manipulation.

On the other hand, the value locked in the Ethereum network’s smart contracts reached a $94 billion all-time high, marking a 42% growth in three months. So, regardless of the competition or the $50 average transaction fee, there’s undoubtedly a growing demand for its DeFi, nonfungible token (NFT), oracle and decentralized marketplaces.

*Ethereum network adjusted total value locked in USD. Source: DeBank*

What is interesting is even with Ether’s positive price action, which is backed by strong usage metrics, bearish put (sell) options dominate Friday’s $700 million ETH options expiry.

*Ether options aggregate open interest for Nov. 12. Source: Bybt*

At first sight, the $415 million in put (sell) options dominate the weekly expiry by 31% compared with the $285 million in call (buy) instruments. The 0.69 call-to-put ratio is deceptive because the recent rally will likely wipe out most bearish bets.

For example, if Ether’s price remains above $4,700 at 8:00 am UTC on Nov. 12, only $10 million worth of those put (sell) options will be available at the expiry. There is no value in a right to sell Ether at $4,700 if it’s trading above that price.

Bears could still tip the scale below $4,600

Below are the four most likely scenarios that consider the current price levels. In addition, the data shows how many contracts will be available on Nov. 12 for both bulls (call) and bear (put) instruments.

The imbalance favoring each side represents the theoretical profit:

Between $4,500 and $4,600: 7,500 calls vs. 13,600 puts. The net result favors bear (put) options by $25 million.
Between $4,600 and $4,700: 12,700 calls vs. 7,300 puts. The net result is $25 million favoring the call (bull) instruments.
Between $4,700 and $4,800: 17,300 calls vs. 2,100 puts. The net result is $75 million favoring the call (bull) instruments.
Above $4,800: 24,300 calls vs. 100 puts. The net result is complete dominance, with bulls profiting $115 million.

This raw estimate considers the call options being used in bullish bets and put options exclusively in neutral-to-bearish trades. Unfortunately, this oversimplification disregards more complex investment strategies.

For instance, a trader could have sold a call option, effectively gaining a negative exposure to Ether below a specific price. However, there’s no easy way to estimate this effect.

Ether price may pull back, but $5,000 remains the target

If Ether’s price holds above $4,800 on Nov. 12, bulls will net a significant $115 million. In that sense, for ETH bears, taking a $25 million loss should be considered a victory.

There’s still a chance that bears avoid losses on Nov. 12’s expiry by pressuring Ether’s price below $4,600 on Nov. 12, down a mere 3% from the current $4,750. Would that be enough to reject the ascending channel initiated three weeks ago? Not really, as there’s room for $4,500 without breaking the support level.

ETH Options