The 330% year-over-year increase of Ether (ETH) was largely driven by the surge in decentralized funding and the explosion of non-fungible tokens. Evidence of this comes from OpenSea, the largest NFT marketplace, which has surpassed the impressive $ 10 billion mark in cumulative trading volume.
However, traders fear that the 15% correction from the all-time high of $ 4,870 on November 10 could indicate that a bigger downtrend is in the works. The collapse of the 55-day ascending channel reinforces this thesis, and the expiry of $ 550 million worth of ether options on Friday should favor the bears.
The total value of Ethereum of $ 86 billion is tied up in smart contracts, which represents 70% of the market, and that metric has risen 25% in the last two months, signaling that the industry leader is not benefiting from the network’s average gasoline fee is affected by $ 50.
Regulatory uncertainties, particularly in the US, have overshadowed the bull in the cryptocurrency market. For example, on October 18, the New York attorney general’s office issued a “Stop and Cancel” order to two crypto-lending platforms operating in the state.
On November 1, the President’s Working Group on Financial Markets (PWG) released a report focusing on the risks of stablecoins to users and financial stability. The report called on Congress to establish a federal security framework, citing the jurisdiction of the SEC and the CFTC.
More recently, on Nov. 16, U.S. lawmakers began opposing changes to tax reporting requirements for crypto transactions over $ 10,000 in the Infrastructure Act. A group of congressmen has called for a change to exclude miners, validators, and wallet developers for tax purposes under the Bipartisan Infrastructure Framework (BIF).
Whatever the reason for the latest ether price weakness, the bulls’ over-optimism over the expiration of the $ 550 million ETH options on Friday should drive the bears.
At first glance, call (buy) options worth $ 275 million are roughly equivalent to the value of $ 280 million in ETH put (sell) instruments. The 0.98 call rate is a scam, however, as some of those prices seem far fetched right now.
For example, if the price of Ether stays below $ 4,400 at 8:00 a.m. UTC on November 19th, only 7% of the call (buy) options will be available upon expiry. So the right to buy ether for $ 4,400 has no value if it trades below that price.
Bears absolutely dominate the Friday expiration date
Here are the four most likely scenarios for the November 19th expiration: An imbalance in favor of either party represents a theoretical gain. In other words, the number of active call (buy) and put (sell) contracts is each depending on the expiry price:
- From $ 4,000 to $ 4,100: 80 calls versus 35,100 bookings. The net result favors the instruments (bears) put $ 140 million.
- From $ 4,100 to $ 4,200: 340 calls versus 30,000 bookings. Net income favors instruments (Bear) with an additional $ 120 million.
- From $ 4,200 to $ 4,400: 4,840 calls versus 16,900 bookings. The net result is $ 60 million in favor of put instruments (bears).
- Over $ 4,400: 7,640 calls versus 8,700 bookings. The net result is balanced.
This rough estimate looks at call (buy) options used in bullish and put (sell) strategies specifically for neutral to bearish trades. However, a trader could have sold a call, effectively taking negative exposure to ether above a certain price. Unfortunately, there is no easy way to gauge this effect.
Bears have a clear chance of making a profit of $ 140 million
Ether is currently trading near $ 4,150 and there are incentives for the bears to push ETH below $ 4,100 before it expires on Friday. In this case, her estimated profit is $ 140 million.
On the flip side, given Ether’s 12% correction over the past three days, the bulls would happily lose $ 60 million if ETH’s expiry price is above $ 4,200.
Avoiding a loss of $ 140 million is the best scenario for the bulls right now, considering the bearish scenario caused by regulatory uncertainties.
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