Ethereum (ETH) bulls have good reason to celebrate the 20% rally between March 14-24. The price increase surprised many and resulted in the first daily close of over $3,000 in 34 days.
Even with this move, Mark’s $2.4 billion ether option expiration is somewhat uncertain because the bears could easily benefit from the price drop below $3,000.
In a letter to shareholders, Larry Fink, CEO of BlackRock, the world’s largest asset management company, noted that a global social and political crisis and rising inflation could give way to a global digital payment network.
Additionally, crypto investors have become more optimistic after Terra co-founder Do Kwon confirmed plans to stake a mammoth $10 billion BTC. On March 24, the third tranche of Tether (USDT) left the wallet, which is supposed to contain funds intended to buy bitcoins.
Sentiments were mixed on the macroeconomic front. For example, retail sales in Canada rose 3.2% last month, beating market expectations by 2.4%. On the other hand, the UK CPI stood at 6.2% y/y, compared to 5.9% expected.
The bulls expected a miracle, but it did not happen
Ethereum’s recent strength may come as a surprise to many, but some of the bulls have certainly been overly optimistic. Although call options with expiration on March 25 dominate, overconfident bulls have bet $5,000 and up.
Ethereum options pool open interest for March. 25. Source: CoinGlass
A broader view using purchasing power ratios shows a 178 percent advantage for bulls on ether as $1.76 billion (buy) instruments have a higher open interest rate compared to $630 million put (call) options. However, the Call-to-put index of 2.78 is misleading as most bullish games will be worthless.
For example, if the Ether price stays below $3,100 at 08:00 UTC on March 25th, only 10% of call (buy) options will be available. This effect occurs because the right to buy Ether at $3,300 has no value if it trades below that level.
Bears feel better, despite the fact that their numbers are smaller
Here are three most likely scenarios based on the current price action. The number of option contracts available on March 25 for bullish (buy) and bearish (sell) instruments varies depending on the expiration price. The disadvantage of each side is the theoretical advantage:
$2,800 to $3,000: 27,500 calls versus 37,500 puts. The net result is $25 million, which is in favor of bot tools (bears).
$3,000 to $3,200: 64,000 calls for 16,500 puts. The net result in favor of the bulls is $140 million.
$3,200 to $3,300: 88,000 calls for 15,500 puts. Net result in favor of Call (Bull) tools in the amount of $240 million.
This approximation takes into account call options used in bullish trades and calls exclusively in neutral or bearish trades. However, this oversimplification overlooks more complex investment strategies.
For example, a trader may sell a put option, effectively receiving a positive share of Ether above a certain price. But unfortunately there is no easy way to calculate this effect.
$3,000 of Ether will benefit the bears
Ethereum bears need to get rid of a small amount of less than $3,000 to avoid losing $140 million on M. On the other hand, at best, bulls would need a 4% price increase from the current $3,100 to make a profit of $240 million dollars.
Ethereum bears appear to be in worse shape given the positive comments from Larry Fink and the positive bitcoin momentum created by Terrace (a potential 3 billion BTC acquisition of Luna). higher on exhalation). Options for March 25th.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Any investment and trading involves risk. You must do your research when making a decision.