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Data From ETH Options Suggest $500 Price Closer Than Expected

Rise in Ethereum DeFi Tokens Leads to Increasing Crypto Lending Volumes

Ether (ETH) futures have seen a growth of open interest by the tune of 250% within the span of three months, reaching a staggering $1.7 billion in value. This staggering level of open interest occurred due to ETH managing to break past the $400 resistance, reaching the highest price levels it’s seen in the past two years.

Looking At The Basis

As it stands now, however, it’s not quite possible to determine whether or not this rise in futures contracts is a protection, or a result of an increase in sentiment that Ether will breach the $500 mark.

The only form of reliable data when it regards to this, is the basis: The comparison between the price of a futures contract against the spot price of that same asset within the open market.

Should the basis be positive, commonly referred to as “premium,” it can indicate to a contango situation. This stands as the expectation within a healthy market, simply showing that sellers are demanding more money in order to postpone the trade settlement.

Bullish Sentiments So Far

As it stands now, the 1-month futures contracts are currently trading at an annualized premium of 20%. This shows that buyers are expecting the spot price of Ether to go up.

Regarding professional traders, a good way to gauge how bullish they are is to focus on the options market, in particular. Two of the most commonly used indicators to evaluate whether or not sentiments are bear or bull, is to focus on the skew and put/call ratio.

The put/call ratio, in particular, stands as a comparison between the open interest of the put options against that of the call options. Calls are typically used by strategies that are bullish or neutral, with put options being the opposite, in turn.

Put/Call Ratio Shows Neutral Sentiment

As it stands now, the put/call ratio stands at a neutral position, overall, despite the futures market showing bullish sentiments. Indeed, the open interest for both the calls and puts options are almost completely balanced with each other.

This ratio stood at the level of 0.8 just three months ago, which showed that puts stood at a noteworthy 20% less than the bullish or neutral call options.

For greater accuracy, it’s possible to interpret the skew level, as well. This provides a real-time indicator of fear and greed, based on the pricing of the options themselves, and allows for better interpretation of market sentiment.

Skew Shows Less-Bullish Sentiments

The indicators for skew will grow in the negative when the call options (bullish/neutral). The indicator itself usually cycles between the values of +20% and -20%. It stands as a reflection of the current market, regardless of the activities of the previous weeks and days.

The skew has shown that professional traders stand less bullish after Ether broke past the resistance point of $400 back on the 13th of August.

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      A journalist, with experience in web journalism and marketing. Ali holds a master's degree in finance and enjoys writing about cryptocurrencies and fintech. Ali’s work has been published on a number of cryptocurrency publications.