- A record $ 1.5 billion in ether options is set to expire on Friday.
- Experts see short and long term opportunities stemming from the volatility that can arise.
- Insider asked 6 crypto investors and influencers for their perspectives on what could happen next.
- See more stories on the Insider business page.
Traders’ eyes are on their screens on Friday as $ 1.5 billion in ether options expire today.
Considering the initial 16% drop in ether, then surge 56% within three weeks of its March 26 expiration, some are calling the latest expiration a decisive moment for bulls and bears.
With stories of forced liquidations and millions of dollars losses Amid recent bouts of corrections in the crypto market, it makes sense that investors are nervous about the outcome.
Steve Ehrlich, chief executive of crypto brokerage firm Voyager Digital, said he expects more volatility in price movements in the near term.
He notes that among the expiring options there is a significant amount of call options at $ 2,200 and above, meaning that about 73% of the calls will be rendered worthless if the ether is less than. this price at the time of expiration today.
On the flip side, the majority of puts are $ 2,100 or less, which means those options will be virtually worthless if the price of ether goes above that level, he said.
Because the ether was hovering just above $ 2,000 on Thursday afternoon, the price can go either way.
“If it stays at that level by Friday, investors with in-the-money put options could likely exercise their contracts,” he said Thursday, “which will put initial downward pressure on the price of ETH due to oversupply on the seller’s side. “
Despite the downward pressure on prices in the short term, Ehrlich said investors shouldn’t be too fixated on short-term volatility. Instead, he noticed that many Voyager users continue to buy Ether because it holds the top spot on its 24-hour net purchases.
“For many investors, Ethereum is a long-term asset given its actual use cases and the acceleration of its technology,” he said. “While it is possible that there will be a drop in prices at the expiration, many will see this as a business opportunity, and we should see positive price dynamics in the long term.”
So how should investors balance short-term trading and long-term investment opportunities amid the biggest ether options expiration this year? Insider spoke to six crypto traders, investors, and influencers to find out.
Pablo Heman, the pseudonym of a TikTok influencer with over 600,000 followers, is widely known for his bitcoin and altcoin price predictions. He said Insider ethereum’s price action would depend more on bitcoin than its expiring options.
He said that while the upcoming expiration of the Ethereum option would likely lower its price, he believes the real impact will be related to what bitcoin is doing. Indeed, the two are correlated and bitcoin holds a biggest part of the crypto market.
In this scenario, Heman compared Ethereum to an otter in the Bitcoin River. If the otter were to swim in calm waters, its price action would depend primarily on the expiration of its options. But if bitcoin went up or down, the otter would have to swim against the tide and eventually drag bitcoin.
“It’s really hard to anticipate right now because it’s not a normal time, bitcoin is in a strong downtrend. Ethereum is basically following bitcoin. If I have to bet I would say $ 2,000 to $ 1,800 is where Ethereum will be on Friday if bitcoin is between $ 32,000 and $ 29,000.
“The tipping point would be around $ 2,080. It’s basically a bit like a standoff between traders and market makers. So from there, depending on where the pendulum swings, we can expect downward or upward pressure on particular prices, ”he said.
The tipping point is based on the 600,000 options due to expire, where approximately 330,000 are calls and approximately 270,000 are puts which is the intrinsic value of $ 1.5 billion, as of June 21. Market makers will try to keep the price near $ 2,080 for maximum premium inflow, Balina told Insider.
“So ideally an Ethereum move closer to $ 2,500 will move away from the downward pull on Ethereum. But if Ethereum drops below $ 2,080, the next level would be $ 1,920. S ‘it breaks, it will probably go down to $ 1,732, just looking at how the market moves with the options order book, ”Balina said.
However, he is not concerned about short-term price swings as he is bullish on the crypto and says that the planned upgrades, known as the London hard fork, will make Ethereum deflationary. Deployment is tentatively scheduled for later in July.
But Balina expects her price hike to be delayed, adding that it might not be reflected until August. He compared it to Bitcoin’s halving in 2020, when it took a few months for the uptrend to begin.
In the most optimistic scenario, Balina says their models show Ethereum will rise to $ 8,000 or $ 10,000 over the next 12 months.
Scott Melker, an influential crypto trader and investor known as “The Wolf of All Streets,” told Insider that while it is difficult to predict the impact on prices due to an options market still immature ether, investors can turn to the bitcoin options market for clues.
“There has certainly been a history of price suppression before options expired and a price explosion after those expirations,” he said. “This is generally a short-term phenomenon, but it makes sense that the price is somewhat controlled until expiration.”
From his perspective, bearish traders have full control over the June 25 options expiration, meaning they will benefit the most if the ether price is removed before the expiration.
“Once the reins are kind of taken off, they can go crazy,” he said. “I would say you would expect price appreciation after this expiration.”
What’s also noteworthy about this expiration is that the ether is approaching its maximum pain price of $ 1,920, which is the strike price with the most contract put and call options. more open or the price at which most options would close out of the money and expire. without value.
“People often point to this price as where to look for the price to follow because that was basically the cause of the greatest pain for most traders,” he said. “So it’s not that far from the price we’re negotiating at this point. Typically, you will see a downward trend in prices and then free price discovery afterwards. “
Kevin Kang, one of the founders of crypto hedge fund BKCoin Capital, noted on Wednesday that the put / call ratio had fallen from 0.81 to 0.97 in the past 24 hours, meaning many more traders have bought puts to hedge against the downside. as the market has been in the downtrend.
“Looks like traders are hedging this Friday’s dips, buying puts and selling calls to market makers, as the spot-future base has risen significantly, even when trading backwards on some exchanges,” Kang said. in an e-interview by mail.
As traders buy puts and sell calls to market makers, volatility has fallen by more than 20% this month, he noted.
“It seems logical to think that with lower volatility higher prices will follow as we saw last summer where the market traded sideways for a few months and the volatility went down, then ETH recorded explosive price gains of $ 200 to over $ 440 in six weeks, ”he said.
Indeed, Alex Clark, a salesperson at UK-based digital asset broker GlobalBlock, believes June 25 will likely dictate the direction of the ether spot market going forward and may help reach a new historical record.
“Based on the March expiration which saw the value of ether drop 16% before rebounding 56%, in the near term I expect more volatility and more downside. “she said.
“That being said, there are nearly 73,000 Ethereum call contracts with a strike price of $ 5,000, 45,000 contracts with a strike price of $ 6,000 and 50,000 contracts with a strike price of $ 8,000. , many of which expire before the end of the year. “
Clark said the Ethereum London hard fork, which is slated for July, will introduce a deflationary mechanism, which could make the asset more attractive to long-term holders and institutional investors.
“Based on this, I am preparing for a potential decoupling of ETH from BTC as the market matures with a long-term price target of $ 5,500 by August 8,” she said. declared.