Ether (ETH) investors have no reason to complain about the 344% profit accumulating in 2021 until November 24. However, analysts fear that a test of resistance at $4,000 on November 19 will form a descending channel targeting $3,600 by mid-December, down 18% from the current price of $4,400.
Although it has overtaken Bitcoin (BTC) by 16% in just the past month and the ETH/BTC pair has surged to 10-week highs, Ether appears to be struggling for its own success.
Ether/USD price on Bitstamp. Source: TradingView
Users keep complaining about the Ethereum gas fee, which has averaged over $45 over the past three weeks. No matter how difficult it may be, there is no doubt that the largest decentralized financial markets (DeFi) and non-fungible tokens (NFTs) continue to thrive on Ethereum.
Increasing regulatory uncertainty in the US continues to be a critical limiting factor for the growth of ether. On November 24, the Securities and Exchange Commission, or SEC, clarified that the crypto commission, at a public meeting scheduled for December 2, will focus on the regulatory framework.
Even the 1 million ETH that has been burned since the introduction of EIP-1559 in August was enough to keep the ether high at all times. With the network allocating around 5.4 million ETH annually, Ether remains an inflationary asset. However, the price of Ether has increased by 16% since October 25 compared to Bitcoin, which partly reflects this effect.
Bullish talk dominates alternative ETHs with an expiration date of 26th November.
Despite a 10% rebound to $4,400 from an all-time high of $4,850 on November 10, Ether calls mostly dominate towards the end of November 26.
Open interest in Ethereum options will begin on November 26. Source: Coinglass
The green area, which accounts for $820 million in put (or put) options, makes up most of the November 26 expiration date. Compared to offering (selling) $440 million of instruments, the difference is 87%.
However, the buy-to-sell ratio should not be taken literally as the recent decline in ETH is likely to erase 77% of the rally. For example, if the price of Ether remains below $4,400 at 08:00 UTC on November 26, then only $165 million of these call (buy) options will be available at expiration.
In other words, what good is a website if mixed with everything else?
Bears need less than $4,200 to balance their weight.
Here are the three most likely scenarios based on current price action. The number of options contracts available on November 26 for Call and Bear (Put) instruments varies depending on the price of ETH that is expiring. The imbalance in favor of each side has a theoretical value:
Under $4,100: 15,400 calls vs. 15,200 calls. The result is balanced.
Between $4,200 and $4,500: 38,400 calls for $8,800. The net result is $130 million, which corresponds to communication (purchasing) tools.
Over $4,500: 50,200 calls for 2,300 puts. A net result of $215 million for Communication Tools (Bulls).
This rough estimate takes into account that call options are used in bullish play and that put options are used exclusively in neutral to bearish trades. However, this simplification ignores more complex investment strategies.
For example, a trader can sell a put option and have a positive effect on ether above a certain price. Unfortunately, there is no easy way to calculate this effect.
Both sides have incentives to change the price.
The bears need a 7.5% increase from $4,400 to less than $4,100 to balance their weight and avoid losing $130 million. On the other hand, bulls need a 2.3% price increase to $4,500 to increase their earnings by $85 million.
Traders need to keep in mind that the seller has to put in great efforts to push the price and it is usually not effective in bull markets. The incentives in the options market are currently balanced in favor of the $4,200 to $4,500 price range, giving bulls the right to win $130 million on Friday, November 26.