Traders Anticipate Ethereum Prices to Rise Above $2,000
After marking a new high of $1,477 on January 24, Ethereum’s price dropped to $1,206 on January 27. Still, based on derivatives markets, the bulls remain confident that $2,000 is still within their grasp.
The open interest of bearish, neutral put options above $1,360 is irrelevant and only 2,540 Ethereum options, equivalent to $3.4 million in open interest, are above that price level. That said, more than 99.5% of the open interest on put options will be worthless if Ethereum is trading at $1,360 or more.
The call and put data appears to be well balanced, with the open interest indicator favouring the bulls by just 34%. The data also shows that Ether’s 79% rally so far this year has hit the bears.
Currently, neutral to bullish call options ranging from $1,000 to $1,340 amount to 59,730 Ethereum. That equates to $79.6 million in open interest, not counting levels below that range. Therefore, in addition to dominating at a ratio of 23 to 1, the bulls have every incentive to keep raising the price.
For example, if Etherum rallies above $1,440, another 56,000 call options come into play than just 7,600 put options. This equates to another $70 million open interest that favours the call option from neutral to bullish. The imbalance would equal to $152 million. It would completely extinguish the hopes of the bears.
The futures premium indicates that traders are optimistic
The futures premium estimates how expensive longer-term futures contracts are corresponding to today’s traditional markets. It can be viewed as a relative reflection of investor optimism. Fixed-calendar futures usually trade at a slight premium to regular spot exchanges.
These fixed-month futures contracts should trade at an annualized (base) premium of 10% to 20% in healthy markets, and any number above this range indicates extreme optimism. Meanwhile, the lack of a premium is a warning that traders may be bearish.
The premium dropped sharply on January 21. That occurred when Ether’s price fell by more than 20% to test levels below $ 1,100. More recently, on January 27, the premium reached an annualized rate of 8.7% close to neutral to bearish levels.
This data is abundant evidence to support the claim that the options market is bullish. Even during the worst sell-offs in recent months, derivatives markets have been positive.
The current rate of 2.9% equates to a healthy annualized premium of 20%, indicating that the bulls are not anticipating any problems.
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