- Put options for ETH rose significantly, indicating bearish sentiment within the market.
- Implied Volatility witnessed an uptick as price declined.
Despite earnest endeavors from Ethereum’s [ETH] development team to enhance the protocol, the price of ETH experienced a significant downturn in the past month. This decline exaggerated the bearish sentiment in the market towards the king of altcoins.
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Putting it all on the line
According to Greeks.live, Ethereum experienced a surge in bearish options trading activity. The traders carried out significant put options trades involving more than 56,000 contracts, totaling over $100 million in nominal value.
This substantial trading volume represented around 30% of the overall trading volume across exchanges.
The trades were categorized into three distinct segments. The first involved “Naked Buy Weekly Out-of-The-Money (OTM) Put Options,” which included buying contracts to sell Ethereum at a certain price and time, even if Ethereum’s price falls.
The second strategy was a “Bear Spread,” where contracts were bought to sell Ethereum at a lower price of $1800, while simultaneously selling contracts to sell at an even lower price of $1600.
The third approach, known as “Risk Reversal,” entailed buying contracts to buy Ethereum at a higher price of $2100 with selling contracts to sell at a lower price of $1600.
It is pertinent to note that whale behavior showcased cynicism in the short term. However, traders seemed optimistic about Ethereum’s long-term prospects.
The above behavior further indicated that traders were not expecting the price of ETH to go below $16,000 and would hold support at that price level.
Source: Greeks.live
Uncertainty ahead?
The rise in bearish sentiment among traders could be attributed to the growing Implied Volatility (IV) of ETH options. According to The Block’s data, the IV of ETH options witnessed an uptick in the last few days.
Realistic or not, here’s ETH’s market cap in BTC’s terms
An increase in implied volatility suggests that the market anticipates greater price fluctuations for the asset. This could indicate heightened uncertainty and potential upcoming market turbulence.
Source: The Block
At press time, Ethereum was trading at $1834.31. Despite the decline in its price, the number of addresses holding ETH continued to rise.
Source: Santiment