Ether (ETH) bulls seem excited about the recent all-time high of $ 4,870 that was reached on November 10. Although it was a new high in dollars, the price of ETH is still 51% below the June 2017 price in terms of Bitcoin (BTC), But it’s entirely possible that the 0.155 BTC level reached in the previous cycle reflected the overly enthusiastic expectations that were unleashed during the Initial Coin Offerings (ICO) rush.
The very success of the Ethereum network caused congestion and high commissions, favoring competition. For example, in mid-2017, the main “competitors” would have been Ethereum Classic (ETC) and NEM (XEM) and, combined, they barely accounted for 13% of Ether’s market capitalization of $ 37 billion at the time.
Currently, Binance Coin (BNB) and Solana (SOL) aggregate capitalization stands at 32% versus $ 557 billion for Ether.
For the moment, Ether price is trading in an ascending channel with a target of $ 5,000, but the bears apparently still have reason to doubt the network’s ability to deliver on the launch of ETH 2.0 at the end of the year.
This year, Ethereum’s main use case, decentralized finance (DeFi), has caught the attention of regulators and not in a good way. Commissioner of the United States Securities and Exchange Commission (SEC), Caroline Crenshaw, published her opinion Tuesday in the article titled “DeFi Risks, Regulations, and Opportunities”. Mention that the sector lacks market protections and raises concerns about the pseudonymous aspect of space and market manipulation.
Secondly, The value locked in smart contracts on the Ethereum network reached an all-time high of $ 94 billion, marking a growth of 42% in three months. So regardless of the competition or having an average commission of $ 50, there is clearly a growing demand for DeFi protocols, non-fungible tokens (NFTs), oracles and decentralized markets.
What’s interesting is that even with Ether’s positive price action, which is supported by strong usage metrics, bearish put options dominate the expiration of USD 700 million this Friday.
Naked eye, $ 415 million in put options dominate weekly maturity by 31%, compared to $ 285 million in call options. The 0.69 call / put ratio is misleading, as the recent rally will likely erase most of the bearish bets.
For example, if the price of Ether sustains above $ 4,700 at 8:00 am UTC on November 12, only $ 10 million of those put options will be in play at expiration. There is no value in a right to sell Ether at $ 4,700 if it trades above that price.
The bears could still tip the balance below $ 4,600
Here are the four most likely scenarios that take into account current price levels. In addition, the data shows how many contracts will be available on November 12 for bullish (call) and bearish (put) instruments.
The imbalance favoring each side represents the theoretical gain:
- Between $ 4,500 and $ 4,600: 7,500 call options vs. 13,600 put options. The net result favors the bearish options (put) in USD 25 million.
- Between $ 4,600 and $ 4,700: 12,700 call options vs. 7,300 put options. The net result is USD 25 million in favor of buying instruments (bullish).
- Between $ 4,700 and $ 4,800: 17,300 call options vs. 2,100 put options. The net result is USD 75 million in favor of purchase instruments (bullish).
- Above $ 4,800: 24,300 call options vs. 100 put options. The net result is total dominance, with the bulls pocketing $ 115 million.
This gross estimate considers that call options are used in bullish bets and put options exclusively in neutral or bearish operations. Unfortunately, this oversimplification does not take into account more elaborate investment strategies.
For instance, A trader could have sold a call option, effectively gaining negative exposure to Ether (ETH) below a specified price. However, there is no simple way to assess this effect.
Ether price may have pulled back, but the target is still $ 5,000
If the price of Ether sustains above $ 4,800 on Friday, the bulls will take a significant $ 115 million. In that sense, for ETH bears, taking a loss of $ 25 million should be considered a win.
There is still a chance that the bears will avoid losses on Friday’s expiration, pushing the price of Ether below $ 4,600 on November 12, down just 3% from the current $ 4,750. Would that be enough to invalidate the rising channel started three weeks ago? Not really, because there is room to get back to $ 4,500 without breaking the support level.
The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph.com. Each investment and commercial movement involves risks, you must do your own research when making a decision.
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