Market observers believe that the altcoin king Ethereum (ETH) could become the market leader in the coming months with its performance. Observers also suggest that Ethereum’s Blockchain native asset ETH is quite suitable as a fundamental investment in a diversified crypto portfolio. Despite these positive expectations, the options market currently does not share this sentiment for ETH.
Current Status in the Options Market for Ethereum
According to Amberdata, options linked to ETH have shown a trend of price weakness over three months and, although they indicate a slight strengthening trend in the following months, they have yet to show strength. Options are derivatives that allow buyers to profit from price increases and sellers to protect against price movements or profit from price drops. A call option helps to profit from price rises, while a put option provides protection against price falls.
ETH’s one-week implied volatility skew, an indicator of the demand for calls relative to puts, dropped to about -8 on January 24th, reaching the lowest level in the last three months. This suggests that investors in the options market prefer to take positions that the price of the altcoin king will fall. The indicator continues to remain negative with one, two, and three-month skews showing a bearish outlook.
The Break Below $2,400 Leads Investors to Put Options
Observers note that the intensity of sales in ETH is due to the altcoin king’s price falling below a significant support level and investors in the options market turning to selling to generate additional returns.
Imran Lakha, founder of Options Insights, reflected on the sudden increase in ETH skew in a blog post on the leading crypto options exchange Deribit, based on volumes and open interest, saying “The sudden increase in ETH skew reflects the impact of trading flows and the break of the $2,400 fundamental technical support pushing prices towards $2,200.”
Lakha also added, “The next critical level for ETH is at $2,150. Breaking below this level could lead to further declines. The recent price movements across the market indicate a short-term cautious outlook for ETH and increase the demand for hedging.”
