Derivatives analysis shows that ETH will continue to rally between $3,300 and $3,600 in the short term.
Market analysis
Ether (ETH) price is up 13% from its January 9 low at $2,950, but it seems too early to call this move a cycle bottom. Instead, a larger bearish movement has prevailed, and while it appears to be primarily related to the price of Bitcoin (BTC), regulatory concerns and tighter policies by the Federal Reserve. The United States is also blamed for this movement.
BTC and Ether have been under pressure since regulators focused their attention on stablecoins. 1, the US Treasury Department urged Congress to ensure that stablecoin issuers are regulated similarly to US banks.
Currently, a descending channel formation initiated in mid-November shows resistance at the $3,850 resistance. The average network transaction fee has also risen back above $50 and the Ethereum 2 upgrade timed out. The longer the better the situation for competing chains.
Regardless of the reason behind Ether’s 28% price drop over the past six weeks, the bulls missed the opportunity to secure a $300 million profit on the weekly options expiration on January 14. Unfortunately perhaps for them, this scenario of $4,500 and above doesn’t seem viable at the moment.
Put rate shows an 89% advantage for the bulls as $380 million put (buy) instruments have a larger open interest than $200 million put (sell) options la. The current 1.89 measure is a scam as the recent drop in the price of Ether has rendered most bullish bets worthless.
For example, if the price of Ether remains below $3,300 at 8 a.m. UTC on January 14, only $24 million worth of these call (buy) options will be available, but not What’s the point of having the right to buy Ether for $3,300 if it’s trading below that price?
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Bears need ETH price below $3,300 to secure $65 million profit
Here are the three most likely scenarios based on current price action. The number of options contracts available on January 14 for bears (phones) and bears (puts) varies depending on the expiration ETH price. An imbalance in favor of each constitutes a theoretical profit:
- From $3,100 to $3,300: 7,400 calls versus 27,800 bookings. The net result was a profit of $65 million.
- From $3,300 to $3,500: 22,200 calls versus 19,300 orders. The net result is a balance between the bulls and the bears.
- Over $3,500: 32,500 calls compared to 15,600 booked. Net result is $60 million backing bulls.
This rough estimate looks at calls being used in bullish bets and only puts calls in 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 put, effectively gaining positive exposure to Ether above a particular price. But, unlikely, there is no easy way to estimate this effect.
Bulls have no chance
Ether bulls will have an advantage of over $300 million if the price is kept above $4,500. However, the current scenario requires a 6% positive move from $3,300 to $3,500 to create a $60 million advantage.
Considering there are less than 12 hours left until Friday’s options expiration, the bulls will likely focus their efforts on keeping the price above $3,300 to balance the scale.
The views and opinions expressed here are solely those of 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.