Will Institutional Interest in Ethereum Offset Sell-Heavy Options Market?
In the world of cryptocurrency, Ethereum has been making headlines recently due to a surge in Exchange-Traded Fund (ETF) inflows. According to data from SoSoValue, August saw a staggering $3.87 billion flow into Ethereum ETFs, with an additional $1.08 billion arriving in the last week alone.
This bullish trend, however, contrasts with defensive positioning in Ethereum's options markets. The slump in Ethereum's open interest from $24.6 billion to $24.1 billion since September 1, as reported by Coinanlyze, and the increase in open interest of Ethereum puts since the end of August, as shown by Deribit's data, suggest a growing divide.
Sean Dawson, head of research at Derive, notes that the bearish hedging in Ethereum is concentrated on specific price targets and timeframes. For Ethereum's September 12 expiry, almost 10% of volume in the last 48 hours is on the $3600 and $3800 puts, as traders brace for a sharp pullback.
Looking further out, put volume for Ethereum is clustering around the $4,000 and $5,000 strikes for the Sept. 26 expiry, indicating an expectation for a more moderate correction by month's end. This cautious sentiment is further supported by the fact that Ethereum netflow declined to 183 ETH after an inflow of 348,236 ETH on August 25th, per Dune data.
In contrast, Bitcoin ETFs have seen net outflows of $751.12 million for August, despite a positive $440.71 million last week. This trend, which started with Bitcoin, has now extended to Ethereum, indicating that Ethereum investors are becoming increasingly cautious.
The second-largest crypto by market capitalization, Ethereum, is currently trading at $4,368, according to CoinGecko data. Despite the recent 12% drop since August 24, which coincided with potential profit-taking activity and retreat from its new all-time high of $4,955, the overall sentiment remains bullish due to the substantial ETF inflows.
Andrew Melville, head of research at crypto derivatives analytics platform Block Scholes, adds that the price of bearish Ethereum bets has become more expensive than bullish ones. This could suggest that investors are willing to pay a premium to hedge against potential downside risks.
In the midst of this growing divide, it's clear that Ethereum's market dynamics are becoming more complex. As we move forward, it will be interesting to see how these trends unfold and whether the bullish ETF inflows can counteract the bearish sentiment in the options markets.
