Ethereum ETH’s options market shows signs of bullish sentiment over the 30-day and six-month timeframe as investors anticipate the upcoming US spot ETH ETF launch.
The bullish sentiment suggests a lower probability of a buy-the-rumor, sell-the-news event. Such an observation indicates a more bullish sentiment, which might propel Ether to outperform Bitcoin upon launching the ETFs.
Options Traders Bet Heavily on Ethereum Ahead of ETF Launch
Experts speculate the anticipated spot Ether ETFs in the US will start trading in mid-July. Ahead of this debut, options traders are already betting heavily on the price of Ether, expecting a significant rally post-ETF launch.
Data reveals that Ether options market trends on leading BTC and ETH options and futures exchange, Deribit, mirror the bitcoin options market sentiment before the BTC ETFs launched six months ago.
However, one thing stands out which may be crucial in determining Ether’s direction post-ETF launch. The market shows no signs of euphoria compared to the pre-spot Bitcoin market trends.
Moreover, data shows Ethereum’s 30-day volatility skew is approximately 3%. For context, options volatility skew is a metric that measures the difference between the market price and strike price in options contracts.
The observed value of 3% suggests that traders are willing to pay more money for call options, offering buyers higher payouts over the next 30 days.
For context, a call option is a bullish bet allowing a holder to purchase the contract’s underlying asset at a particular price over a specified timeframe. Put calls, on the other hand, are bearish bets.
Besides the 30-day timeframe, Ether call options expiring in the next 180 days are traded at a premium proportional to puts, with the volatility skew hovering around 5%. This suggests that traders want to use their options positions as leverage ahead of the Ether ETF launch and in anticipation of Ethereum’s price rally over the next six months.
Notably, traders employed a similar strategy two weeks before the BTC ETFs launch on January 11. During those periods, Bitcoin’s volatility skew for the 30-day time frame was 3.5%, while the 180-day skew hovered around 5%.
Potential Impact on Ether’s Price?
The bullish bias among traders stems from the optimism that spot ETH ETFs will attract billions of dollars in mainstream institutional investment to the Ether market.
Moreover, according to data from Farside Investors, Bitcoin ETFs had received more than $14.6 billion in net inflows as of July 2, 2024. Investors expect the same for the upcoming spot Ether ETFs.
Analytical platform IntoTheBlock confirms this in the latest episode of its weekly newsletter. The firm said the upcoming Ether ETFs will likely significantly impact Ethereum’s price as they will attract a new wave of investors.
Since Ethereum’s supply is more concentrated in long-term holders, IntoTheBlock believes Ether’s price could greatly boost if the ETF inflows are as high as the BTC ETF flows.
However, JPMorgan analysts shared a more pessimistic outlook in May, noting that Ether ETFs could see only $3 billion in net inflows this year. They believe Bitcoin enjoyed a first-mover advantage, saturating the demand for other crypto assets in response to the spot BTC ETF approvals.
In an email, Marex Solutions’ co-head of digital assets, Illan Solot, thinks this pessimism might lead to Ether’s outperformance. However, he fears the prevalence of delta-neutral trades may blur the ETH/BTC ETF inflow comparison and overestimate the possible price impacts.
Ethereum (ETH) trades at $3,309, with a 4% price decline in the last 24 hours. The crypto asset has dropped nearly 2% of its gains in the last seven days.
Disclaimer: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.
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