Ethereum bears are aiming for new lows
ETH bulls will need to keep looking for good news, especially as bears pile on the pressure ahead of Friday’s $1.1 billion monthly options expiry. The price of Ether (ETH) fell below $3,000 on January 21 as regulatory uncertainty continued to weigh on the sector, and rumors that the US Securities and Exchange Commission is reviewing DeFi’s high-yield crypto lending products circulated.
The Russian Finance Ministry submitted a crypto regulatory framework for review on January 27. The proposal suggests that crypto operations occur within traditional banking infrastructure, with mechanisms in place to identify traders’ data.f
Take note of how Ether’s price has been trending downward for the past 75 days, adhering to a channel that currently holds $2,200 as a support level. A 19% price increase from the current $2,500 level to the $3,000 resistance level, on the other hand, would not necessarily indicate a trend reversal.
Surprisingly, call (buy) option instruments vastly outnumber put (sell) option instruments in Friday’s $1.1 billion expiries. A broader view using the call-to-put ratio shows Ether bulls have an 82 percent advantage because the $680 million call (buy) instruments have more open interest than the $410 million puts (sell) options. The 1.82 call-to-put indicator, on the other hand, is deceptive because the price drop below $3,000 rendered most bullish bets worthless.
For example, if the price of Ether remains below $2,500. UTC on January 28, only $57 million in call (buy) options will be available. There is no value in the right to buy Ether at $2,500 if it is trading below that level.
Based on the current price action, the three most likely scenarios are as follows. On Friday, the number of options contracts available for bulls (calls) and bears (puts) varies depending on the expiry price. The theoretical profit is the imbalance favoring each side:
Between $2,200 and $2,400, there are 3,200 calls and 121,500 puts. The net result is a $270 million advantage in favor of put (bear) instruments.
Between $2,400 and $2,700, there are 19,500 calls and 95,500 puts. The net result is $190 million in favor of the bears.
34,700 calls vs. 73,400 puts between $2,700 and $2,900. The net result is $110 million in favor of the put (bear) options.
ETH below $2,400
To make a $270 million profit on Friday, ether bears need a gentle push below $2,400. On the other hand, Bulls would require a price recovery of 8.4 percent from the current $2,500 level to reduce their loss by 58 percent.
Given the bearish regulatory newsflow, Ether bulls are unlikely to take on additional risk at this time. As a result, bulls should focus their efforts on salvaging a portion of this defeat by keeping the Ether price above $2,500, resulting in a $170 million loss.