The 330% increase in Ether (ETH) from the beginning of the year to date has been largely driven by the increase in decentralized finance and the explosion of key tokens. Proof of this is OpenSea, the largest NFT marketplace, exceeding an impressive $ 10 billion in total trading volume.
However, traders are concerned that the 15% correction that followed the record high of $ 4,870 on November 10 may indicate a serious bearish move. The 55-day bullish channel disruption reinforces this thesis, and the expiration of the $ 550 million Ether options on November 19 is likely to favor the bears.
Ether / USD price on Bitstamp. Source: TradingView
The total value of Ethereum of $ 86 billion locked in smart contracts accounts for 70% of the market, and this estimate has increased by 25% in the last two months, indicating that the industry leader has not been affected by the average gas of $ 50. price online. …
Adjusted total locked value (TVL) of the Ethereum network in USD. Source: Debank.com
Regulatory uncertainty, especially in the US, has overshadowed the bullish growth in the cryptocurrency markets. For example, on October 18, the New York Attorney General’s Office issued a “stop and surrender” order to two crypto-lending platforms operating in the state.
On November 1, the President’s Financial Markets Working Group (PWG) issued a report focusing on the risk of stable coins for users and financial stability. The report asks Congress to issue a federal regulatory framework, citing the jurisdiction of the SEC and CFTC.
More recently, on November 16, U.S. lawmakers began opposing changes to the tax reporting rules for cryptocurrencies over $ 10,000 in the recently adopted infrastructure bill. The congress group has asked for changes to exclude miners, validators and wallet developers from tax purposes under the two-tier infrastructure (BIF).
Regardless of the reason for the recent fall in the price of ether, bulls’ over-optimism about the expiration of 550 million ETH options on Friday will probably give the bears more room to push the market down.
Ether options collect open interest rates 19 November Source: Bybt
At first glance, $ 275 million in call options is almost the same as $ 280 million in instruments to sell ETH. However, the option ratio of 0.98 is misleading because some of these prices now seem far-fetched.
For example, if the Ether price stays below $ 4,400 at 08:00 UTC on November 19, only 7% of call (buy) options will be available after expiration. Thus, the right to buy Ether at $ 4400 has no value if it is traded at a lower price than that.
Björn fully dominates Friday’s final
Below are the four most likely expiration scenarios for November 19th. An imbalance that favors both sides is of theoretical value. In other words, depending on the expiration price, the number of call (buy) and sell (sell) contracts that become active varies:
$ 4000 to $ 4100: 80 calls against 35 100 puts. A net result of $ 140 million in favor of options (bearish) instruments.
Between $ 4100 and $ 4200: 340 calls against 30,000 puts. A net profit of 120 million dollars in favor of the (bearish) instruments.
Between $ 4200 and $ 4400: 4840 calls against 16900 puts. The net result is $ 60 million, which is in favor of put (carry) instruments.
Over $ 4400: 7640 calls against 8700 putter. The net result is even.
This rough estimate takes into account put (put) options used in bullish strategies and put (put) options exclusively in neutral or bearish trades. However, the trader can sell the call, and effectively get negative exposure to the ether above a certain price. Unfortunately, there is no easy way to calculate this effect.
The bears have a clear chance to earn $ 140 million.
At the moment, Ether is close to $ 4150 and the Bears have incentives to push ETH below $ 4100 before Friday expires. In this case, their estimated profit reaches $ 140 million.
On the other hand, given a 12% correction in Ether over the past three days, the bulls would more than likely suffer a $ 60 million loss if the ETH expiration price exceeds $ 4,200.
Avoiding a $ 140 million loss is the best case scenario at the moment given the bearish scenario driven by regulatory uncertainty.