Traders expect Ethereum price to drop further ahead of $ 550 million options expiration on Friday

The 330% gain in Ether (ETH) since the start of the year has been largely fueled by the growth of decentralized finance and the explosion of non-fungible tokens. Proof of this is OpenSea, the largest NFT marketplace, surpassing the impressive mark of $ 10 billion in accumulated transaction volume.

However, traders are concerned that the 15% correction that followed the all-time high of $ 4,870 on November 10 could indicate that a larger bearish move is in place. The 55-day ascending channel break strengthens this thesis, and the expiration of the $ 550 million Ether options on November 19 will likely favor the bears.

Ether / USD price on Bitstamp. Source: TradingView

Ethereum’s $ 86 billion total value stuck in smart contract contracts accounts for 70% of the market and that metric has risen 25% in the past two months, signaling that the industry leader has failed was affected by the network’s average gas charge of $ 50.

The Ethereum network has adjusted the Total Locked-In Value (TVL) in USD. Source: Debank.com

Regulatory uncertainties, particularly in the United States, have eclipsed the bullish race in the cryptocurrency markets. For example, on October 18, the New York attorney general’s office issued a “cease and desist” order to two crypto lending platforms operating in the state.

On November 1, the President’s Financial Markets Task Force (PWG) released a report focusing on the risks of stablecoins to users and financial stability. The report urged Congress to issue a federal prudential framework, citing the jurisdiction of the SEC and CFTC.

Most recently, on November 16, U.S. lawmakers began fighting changes to the tax reporting rules for cryptocurrency transactions over $ 10,000 in the new infrastructure bill. A group of members of Congress called for revisions to exclude minors, validators and wallet developers for tax purposes under the Bipartisan Infrastructure Framework (BIF).

Whatever the reason for the recent weakness in Ether prices, the overly bullish optimism about the $ 550 million ETH options expiration on Friday will likely give the bears additional ammo to put pressure on. the market.

Ether options add up to open interest for November 19. Source: Bybt

At first glance, the call (call) options valued at $ 275 million are practically the same as the $ 280 million value of the ETH sell (put) instruments. Yet the call-to-put ratio of 0.98 is misleading as some of these prices now appear to be exaggerated.

For example, if the price of Ether remains below $ 4,400 at 0800 UTC on November 19, only 7% of the call (buy) options will be available at expiration. So the right to buy ether at $ 4,400 has no value if it trades below that price.

Bears completely dominate Friday’s expiration

Below are the four most likely scenarios for the November 19 expiration. The imbalance in favor of each side represents the theoretical profit. In other words, depending on the expiration price, the amount of buy (buy) and sell (sell) contracts that become active varies:

  • Between $ 4,000 and $ 4,100: 80 calls against 35,100 put options. The net profit favors the selling instruments (bear) of 140 million dollars.
  • Between $ 4,100 and $ 4,200: 340 calls against 30,000 put options. The net result favors the selling instruments (bear) of 120 million dollars.
  • Between $ 4,200 and $ 4,400: 4,840 calls against 16,900 put options. The net result is $ 60 million in favor of put (bear) instruments.
  • Above $ 4,400: 7,640 calls against 8,700 put options. The net result is even.

This raw estimate considers call (call) options used in bullish strategies and put (put) options exclusively in neutral to bearish trades. However, a trader could have sold a call option, effectively gaining negative ether exposure above a specific price. Unfortunately, there is no easy way to estimate this effect.

Bears have a clear chance of making a profit of $ 140 million

Currently, the price of ether is trading near $ 4,150, and there are incentives in place for bears to push ETH below $ 4,100 before Friday’s expiration. In this case, their estimated profits reach $ 140 million.

On the other hand, considering the 12% correction of Ether over the past three days, the bulls would be more than happy to suffer a loss of $ 60 million if the expiration price of ETH exceeds. $ 4,200.

Avoiding a $ 140 million loss is the best case scenario for the bulls right now, given the bearish scenario caused by regulatory uncertainties.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trade move involves risk. You should do your own research before making a decision.



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