Ether’s 330% year-over-year increase is largely due to the surge in DeFi and the explosion of NFTs. Proof of this is provided by OpenSea, the largest NFT marketplace, which has exceeded the $ 10 billion mark in cumulative trading volume.
However, traders fear that the 15% correction from the all-time high (ATH) 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 ether options today (Nov. 19) should favor the bears.
Ether price chart | Source: TradingView
The total value of Ethereum of 86 billion
Total Value Locked (TVL) in the Ethereum network | Source: Debank.com
Regulatory uncertainties, particularly in the US, have overshadowed the bull-run cycle of the crypto market. For example, the New York Attorney General (NYAG) issued a “stop-and-stop” regulation on October 18 for two crypto-lending platforms operating in the state.
On November 1, the US President’s Financial Markets Working Group (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 November 16, U.S. lawmakers began a new infrastructure bill to oppose changes to tax reporting requirements for crypto transactions over $ 10,000. A group of MPs has called for a change to exclude miners, validators and wallet developers for tax purposes under the non-partisan infrastructure framework (BIF).
Whatever the cause of the recent ether price weakness, the bulls’ over-optimism about today’s $ 550 million option expiry is likely to cause the bears to exacerbate downward pressure.
Ether Options OI recap for November 19th | Source: Bybt
The $ 275 million call options were roughly the same as Ether’s $ 280 million put options. The 0.98 call-to-put ratio is far from accurate, however, as some prices seem far-fetched right now.
For example, if the price of Ether remains below $ 4,400 at 3:00 p.m. local time today, only 7% of the call options will be available upon expiry. The right to buy ether for USD 4,400 will expire if it is traded below that price.
Bears totally dominate as they decay
Here are the four most likely scenarios for options expiration today. The imbalance in favor of one of the parties represents the theoretical profit. In other words, depending on the expiry price, the number of active buy and sell contracts varies:
- From $ 4,000 to $ 4,100: 80 buy orders vs. 35,100 sell orders. Net income favors a $ 140 million (bear) put option.
- From $ 4,100 to $ 4,200: 340 buy orders vs. 30,000 sell orders. The net result speaks in favor of a put option of $ 120 million (bear).
- From $ 4,200 to $ 4,400: 4,840 buy orders vs. 16,900 sell orders. The net result speaks in favor of a $ 60 million (bear) put option.
- Over $ 4,400: 7,640 buy orders vs. 8,700 sell orders. The net result is a balance between the two factions
This rough estimate looks at calls that are used in bullish and put strategies specifically for neutral to bearish trades.
Ether price is currently trading near $ 4,150, and there are perks for the bears pushing the price below $ 4,100 before today’s expiry. If so, her estimated profit would reach $ 140 million.
On the flip side, given Ether’s 12% correction over the past three days, the bulls would happily lose $ 60 million if the price is above $ 4,200 by the time the option expires. Avoiding a loss of $ 140 million is the best scenario for the bulls right now.
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Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.
According to Cointelegraph