ether (ETH) faces it Biggest option expiry on June 25 Because of the $3.3 billion hypothetical open interest (OI) in ETH options, approximately $1.5 billion will be liquidated. It has over 638,000 ETH options contracts in its range at the end of June, which accounts for 45% of the total open interest in these options.
Although this is the largest option expiration in the history of the derivative product, open interest in ETH Options OI reached its all-time high of nearly $5.5 billion on May 20, when ETH reached its all-time high of $4,362 on May 12.
The heavy expiry amid ongoing market volatility is indicative of increased interest in the ETH derivatives market despite the token trading in the $2,270 range, down 47.61% from an all-time high since mid-May. Luke Striggers, chief commercial officer of crypto derivatives exchange Deribit, told Cointelegraph:
“The put call ratio for June end is 0.79, which indicates that there are more calls outstanding versus puts (64,000 more). This is indeed a sign of bullish sentiment, however, the majority of this OI is placed in contracts far away from the current ETH price, indicating a low probability of running out of money. “
However, analyst Robbie Liu from the Market Insights team of OKEx – a cryptocurrency exchange – pointed out that what this price difference reflects, “the expiry is still dominated by bears as a large number of call options are far away from the current price. eg. Therefore, the largest OI is concentrated in the strike at the $3,200 mark for the call option.”
Call option contracts allow holders to buy Ether at a predetermined price on the expiration date, while Put option contracts allow them to sell Ether under the same pre-requisites. Under normal circumstances, call options are used to complement a bullish strategy, while put options are used as a hedge against negative price movements of the underlying.
The maximum pain value for this record end is $1,920. This price is the point where the largest number of options are at a loss, making it highly unlikely that the price of ETH will drop more than 10% from its current trading range. However, as seen on May 19, a day now commonly known as Black Wednesday In the cryptoverse, seasoned investors would never say never.
Strijders further explained the impact of increasing open interest in terms of number of contracts: “Due to the increasing size of our open interest pool, we see our option expirations becoming more and more important liquidity and risk transfer events that are a virtue. Making a circle.”
He also noted that even though the fall in the spot price has resulted in a decrease in the notional open interest of ETH options in terms of the value of the United States dollar, the open interest measured in contracts has been barely affected by the decline in prices. This indicates continued interest in the ether derivatives market despite the price drop.
CME data shows rising institutional demand
The world’s largest derivatives exchange, the Chicago Mercantile Exchange, launched its ether futures product earlier this year on February 8. much awaited launch Over $30 million seen on first day of trading on the exchange.
according to a report good By OKEx, the launch of CME Ether Futures comes in the form of an “approval of approval” from the most widely used exchange for derivatives products. Richard Delany, a senior analyst at the OKEx Insights team, continued, “It seems like this is indeed attracting significant institutional interest to the number two cryptocurrency.”
However, Delany also pointed out that the market conditions and the context surrounding the launch are quite different compared to CME’s Bitcoin Futures launch in December 2017. The launch of CME’s bitcoin (B T c) futures came during an extended bear market when interest in digital currencies waned across the board, and the product exposed the major cryptocurrencies to institutions unable to access channels available to retail investors. Delaney said:
“In the more than three years since CME BTC Futures was launched, there has been an increased familiarity with such crypto trading instruments, leading to a massive increase in both CME BTC Futures and their newer ETH counterparts. Despite the recent market correction, interest in the cryptocurrency remains modest. It’s a lot higher than it was at the beginning of 2018.”
According to data provided by CME to Cointelegraph, its ether futures contracts had an average daily volume (ADV) of 5,895 contracts in May, and the average open interest in May is 3,082, equivalent to $6.86 million in estimated value.
The record trading day for the CME Ether futures contract was on May 19, which equated to a total of 11,980 contracts, or $26.5 million worth of options. The record open interest of 3,977 contracts came on June 1, which is equivalent to $8.82 million at the current market cap of the token.
Large open interest holders (LOIH) in this derivatives contract also hit a high of 45 on May 25, with a May average of 37 LOIH. Each LOIH consists of at least 25 futures contracts, which are equivalent to a notional value of at least 1,250 ETH, or $2.7 million, at the time of writing. However, Strijders explained why this increase was limited, “CME has realized approximately $400 million in ETH open interest. Growth of this amount is somewhat limited due to the current yield constraints, which is a big deal for CME volume.” was the driver.
However, a CME spokesperson also noted that at present, there are no plans to include additional cryptocurrency products such as Ether Options in their product suite, which includes Bitcoin and Micro Bitcoin Futures, Bitcoin Options, and Ether Futures.
Relationship between BTC and ETH
Ether’s correlation with Bitcoin declined to a level below 0.6 in early May, due to completely independent price movements that Ether did during that period. The one-month correlation ranged between 0.7 and 0.8 in April before falling to 0.5-0.6 in early May, but quickly rose to 0.9 in early June, a high level since then.
However, in Recent BTC Rally to $41,000, ETH showed limited price movement, trading consistently in the $2,400-2,500 range throughout the rally, driven by news of a formation in El Salvador. First country to accept bitcoin as legal tender. “In the recent days, the rally in ETH hasn’t gained as much momentum as BTC, with the price of ETH/BTC down 20% from the June 7 highs,” Liu explained.
Since the positive price trend for BTC prior to May 16th, Bitcoin has been steadily falling to the $35,500 mark, with it pulling ETH to trade in the $2,200 range, a 6% drop in 24 hours. is. Liu mentioned why ETH may take longer than BTC to rebound from the current price drop:
“If we look back at the beginning of 2018, ETH set its all-time high price a month after BTC topped out. And then ETH/BTC experienced a two-month decline before the trend reversed. Will take longer to reverse the momentum of ETH.”
However, for the Ethereum network, June brought improvements in one important aspect: gas fees. Network transaction fees for both bitcoin and ethereum On June 1 at a six-month low.
This change occurred in June, almost two months after the Berlin hard fork on 13 April, which was a preliminary step towards addressing the gas tariff issue that has long plagued the network. Liu continued:
“Consistently high gas fees in March and April were clearly a major reason for fund transfers to EVMs and sidechains, which led to the total value locked in BSC. Furthermore, in the mid-May selloff, Ethereum gas charges 1,000 GVE , causing DeFi participants to move to polygons.”
Even though the lower gas fee may be a result of congestion in the network rather than fewer transactions altogether and a scalability fix, it brings much needed relief to investors and decentralized finance users alike.
As the top two cryptocurrencies continue to lose price momentum, it will be interesting to see the changes that the bear-dominated termination of $1.5 billion will bring for the Ethereum network and the price of its tokens.