The price of Ether (ETH) has risen 88% since November, astonishing even the most optimistic investors as the top altcoin hit a 2020 high of $ 750.
Aside from the upcoming launch of the CME ETH Futures on February 8, the phenomenal growth of Total Value Locked (TVL) in the protocols for decentralized finance also played an important role.
Total blocked value, USD. Source: DeFi Pulse
As can be seen from the data above, investors are even more confident that Eth2 has been a success despite the real potential for delays and implementation hurdles.
Another possible bullish factor in the background is the recent 2-year low in the ETH miners’ balance sheets. This certainly eases the potential selling pressure and leaves room for another bullish continuation.
Over the past three months, open interest in ether options has increased 150% to a total of $ 880 million. This incredible build occurred when the cryptocurrency broke the USD 700 resistance and hit its highest price since May 2018.
Ether options open interest. Source: Crytorank.io
The put-call ratio was optimistic
By measuring whether there is more activity through call (buy) options or put (sell) options, it is possible to measure general market sentiment. Generally, call options are used for bullish strategies, while put options are used for neutral to bearish strategies.
Open put / call ratio for ether options. Source: Cryptorank.io
Despite the recent price rally, the put / call ratio has fallen significantly. This move suggests that the more bullish call options have dominated the volume. One should expect the exact opposite when traders are making profits or preparing for a possible downtrend.
This is a remarkable contrast to the 0.94 level two weeks ago, which indicated that the put options were well balanced with the neutral to bullish call options.
Option data shows traders expect another 20% hike to $ 880
The odds of the current option trades are calculated using the Black & Scholes model. Deribit Exchange presents this information as a “Delta”. In short, these are the percent odds for each hit.
Ether January 29th Call Options Delta. Source: Deribit
According to the data above, the $ 880 strike has a 34% probability on January 25, while the most traded $ 960 strike has a 25% rate according to the option pricing model.
Note that the statistical model tends to be overly conservative as even the $ 720 strike only has a rate of 59%.
The expiry in March is also extremely optimistic
With 86 days remaining until the end of March 2021, the likelihood that the Ether price will exceed $ 880 is even more likely.
Ether September 25th Call Options Delta. Source: Deribit
The same $ 880 strike now has a rate of 49% on the Black & Scholes pricing model, while the amazing $ 1,120 expiry is 33%.
As shown above, the options for March 2021 trade at a relevant volume and cost $ 114 each. These data are undeniable evidence of the optimistic mood of traders.
The futures market data reflects the bullish sentiment
An even better way of measuring the sentiment of professional investors towards the market is to analyze the premium of the futures markets. This is measured by the difference between long-term future contracts and the current spot price of Ether (ETH).
March 2021 Ether Futures Premium. Source: Digital Assets Data
The graph above shows that the indicator hit a high of 5.8% on December 19 and hit the same level again on December 28, when the price of ether hit a multi-year high. A sustained futures premium of over 3.5% reflects optimism, although this is far from being exaggerated.
The current rate of 4.3% corresponds to an annualized premium of 18% and is well above the level of the previous months. This shows that despite a swing high at USD 750, professional traders remain confident that Ether has future potential.
It may be too early to tell if the derivatives market will diminish its optimism, but for now, the bulls appear to be in full control.
While there is always the possibility of a correction in the price of Ether, it is unlikely that it will be strong enough to cause chaos as the market is showing no signs of overly optimism.
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