Following a robust surge in Ether (ETH) prices, options traders are exhibiting caution, suggesting potential short-term weakness in the cryptocurrency market. Despite ETH’s impressive climb above $4,000 to levels unseen since late 2021, a shift in sentiment toward protective put options indicates apprehension among investors.
Options Market Analysis
Analysis of Ether’s options market reveals a notable shift in sentiment, with the one-month call-put skew turning negative. This suggests a preference for puts, indicating a defensive stance against potential bearish movements. Similarly, the 60-day gauge has tilted in favor of put options, while longer-term metrics remain positive.
Put options grant the purchaser the right, though not the obligation, to sell the underlying asset at a predetermined price in the future. Investors opting for put options typically hold a bearish outlook, seeking to shield their spot market holdings from potential price declines, thus hedging against market downturns.
Reasons for Increased Demand
The surge in demand for near-term Ether puts can be attributed to mounting uncertainties surrounding the anticipated approval of a spot Ether exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission (SEC) before May. This approval was anticipated to catalyze further price appreciation, akin to the impact seen with Bitcoin ETF approvals earlier this year.
Probability Dwindles
The probability of a spot Ether ETF approval by May has significantly decreased, according to analysts at Bloomberg, who slashed their estimates from 70% to 30%. Similarly, the decentralized betting platform Polymarket reflects a reduced probability, dropping from over 70% in January to 31%. This decline in optimism is echoed by JPMorgan, which assessed the likelihood at no more than 50%.
SEC Delays and Speculation
Recent delays in the SEC’s decision on BlackRock and Fidelity‘s applications for spot ETH ETFs have further fueled uncertainty. Despite this setback, there remains hope among observers for potential approval, particularly concerning BlackRock’s ETF, with speculation centered around the decision due on May 23, coinciding with VanEck’s ETH ETF application.
The 30- and 60-day skews hover below zero, indicating a bias for puts. (Amberdata) (Amberdata)
In the wake of Ether’s impressive price breakout, options traders are positioning themselves cautiously, indicating a potential short-term weakness in the cryptocurrency. The increased demand for protective put options reflects growing apprehension amidst uncertainties surrounding the SEC’s approval for a spot Ether ETF, underscoring the significance of regulatory decisions in shaping market sentiment and direction.
