The 20% increase in Ether (ETH bulls) between March 14th and March 24 is a reason to be proud. Many were surprised by the price rise, which led to the first daily close above $3000 in 34 days.
Marc’s $2.4 BILLION Ether Options expire are uncertain. Bears could profit easily by driving the price down to $3,000.
Larry Fink, CEO of BlackRock, one of the largest asset managers in the world, wrote to shareholders to suggest that the growing inflation and global socio-political crises could open the way for a global network of digital payments.
After Terra co-founder Do Kwon confirmed plans for the $10-billion BTC allocation, crypto investors became bullish. The third tranche of Tether (USDT), which was sent on March 24, left a wallet that is believed to be holding funds intended to buy Bitcoin.
There have been mixed emotions on the macroeconomic side. Retail sales in Canada increased 3.2% last month, exceeding the 2.4% market expectations. However, the Consumer Price Index for the United Kingdom was 6.2% year-overyear, while expectations were at 5.9%.
Bulls were expecting a miracle. It didn’t happen.
Although Ether’s recent strength may have been surprising to many, some bulls were clearly over-optimistic. Overconfident bulls placed bets of $5,000 or higher on the March 25 expiry call (buy) option instruments.
For March, Ether options combine open interest. 25. Source: CoinGlass
The call-to-put ratio gives a wider view of Ether bulls. The $1.76billion call (buy) instruments have more open interest than the $630m put (sell). This 178% advantage is evident. The 2.78 call-to -put indicator can be misleading as most bullish bets will lose value.
If Ether’s price is below $3,100 on March 25, a mere 10% of the call (buy options) will be available. This is because Ether’s price below $3,100 doesn’t have any value.
Bears, despite being smaller in numbers, are better placed
Based on current price action, here are the three most likely outcomes. The expiry price will determine the number of options contracts that are available for bulls (call) or bears (put) instruments on March 25, but it can vary. The theoretical profit is the result of an imbalance in favor of each side.
Between $2,800 to $3,000: 27500 calls vs. 37.500 puts. The net result favors the put (bear), instruments. Between $3,000 and $3,000. 64,000 calls vs. 16,500. Bulls are favorably favored by $140million. Between $3,200 and 3,300: 88,000 calls vs. 15,500 put. The net result favors bull instruments by $240 millions.
This rough estimate includes the bullish options and neutral-to bearish options. This oversimplification ignores complex investment strategies.
A trader might have sold a call option to gain Ether exposure above a certain price. Unfortunately, it’s not possible to accurately estimate the effect.
Bears would be benefited by sub-$3,000 Ether
To avoid a $140m loss on M, Ether bears will need to take a small amount below $3,000; bulls would prefer a 4% price rise from $3,100 in order to make a profit of $240m.
The Ether bears are in a worse place considering Larry Fink’s positive comments and the positive Bitcoin momentum that was triggered by Terra’s (3 billion BTC) acquisition of Terra. As the March 25 expiry date approaches, the most likely outcome is for bulls to continue their strength and push the price up to $3,200 or more.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.