ETH bulls will need to keep looking for positive news, especially as the bears apply more pressure ahead of Friday’s $1.1 billion monthly options expiration. .
Market analysis
Ether (ETH) price dropped below the $3,000 support on January 21 as regulatory uncertainty continues to affect the sector and rumors that the US Securities and Exchange Commission is watching DeFi’s high-yield crypto-lending products continue to go viral.
On January 27, the Russian Ministry of Finance submitted a crypto regulatory framework for review. The proposal suggests that cryptocurrency operations are carried out within traditional banking infrastructure and include mechanisms to identify traders’ personal data.
Other bearish news came as Ryan Korner, a top agent from the US Internal Revenue Service’s (IRS) Los Angeles office of criminal investigations, made negative remarks during a virtual event hosted by the School of Public Affairs. Law USC Gould organized. According to Ryan, crypto is the “future,” but “fraud and manipulation are still rampant in the space.”
Ether bulls are trying to determine if the drop to $2,140 on January 24 is the final bottom for the current downtrend. This 47.5% correction in 30 days resulted in a total of $1.58 billion in long-term futures contracts being liquidated.
Notice how the price of Ether has been falling for 75 days, respecting a channel that is currently holding $2,200 as support. On the other hand, a 19% rally from the current $2,500 level to the $3,000 resistance level will not necessarily mean a trend reversal.
Curiously, call (buy) options dominated the $1.1 billion expiration on Friday, but the bears were better positioned after Ether price stabilized below $3,000. .
A broader view using order rate shows an 82% advantage for Ether scalpers as $680 million worth of call (buy) instruments have a larger open interest compared to options. choose to put (sell) $410 million. However, the 1.82 call-to-put indicator is a scam as a drop below $3,000 has rendered most bullish bets worthless.
For example, if the price of Ether remained below $2,500 at 8 a.m. UTC on January 28, there would be only $57 million worth of those call (buy) options. That effect occurs because there is no value in the right to buy Ether at $2,500 if it is trading below this level.
Data shows bulls set for a significant loss
Here are the three most likely scenarios based on current price action. The number of options contracts available on Friday for bears (calls) and bears (puts) varies depending on the expiration price. An imbalance in favor of each constitutes a theoretical profit:
- From $2,200 to $2,400: 3,200 calls versus 121,500 bookings. The net result is $270 million in favor of put instruments (bears).
- From $2,400 to $2,700: 19,500 calls versus 95,500 bookings. The net result brings the figure to $190 million.
- From $2,700 to $2,900: 34,700 calls versus 73,400 bookings. The net result favors the put (bear) option to $110 million.
This rough estimate considers calls used in bullish bets and puts specifically for neutral to bearish trades. Even so, this simplification does not take into account more complex investment strategies.
For example, a trader might have sold a call, effectively gaining negative exposure to Ether above a particular price. But unfortunately, there is no easy way to estimate this effect.
Bears Will Try to Keep ETH Below $2,400
Ether bears need a slight push below $2,400 for a profit of $270 million on Friday. On the other hand, the bulls will need the price to recover 8.4% from the current $2,500 to reduce the 58% loss.
Considering the bearish regulatory news stream, Ether bulls are unlikely to be willing to add much risk right now. Therefore, the bulls should focus their efforts to partially salvage this failure by keeping Ether price above $2,500, resulting in a loss of $170 million.
January seems to have given Ether the edge in keeping the price pressure on in the short term.
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