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Bulls Struggle to Hold Ethereum Price Above $ 4,000 Before $ 435 Million in Options Expires

The price of Ether (ETH) flirted with its all-time high of $ 4,380 on October 21, but failed to break it by a few dollars. Some analysts, including the independent market analyst, Scott Melker, believe that the approval of an exchange-traded fund (ETF) is the next logical step for the US Securities and Exchange Commission (SEC).

As disappointed as the Ether bulls are, a $ 78 million profit is likely to be posted on the options expiration on Oct. 22. The bears were apparently caught off guard as Ether racked up a 35% gain so far this month.

Price of Ether in USD (Bitstamp). Source: TradingView

Investor sentiment was also positively affected for the Houston Firefighters Pension Fund, which announced a USD 25 million allocation in Bitcoin (BTC) y Ether.

The steady decline in the liquid supply of Ether is also a key factor behind the recent rally. According to data from Glassnode, the balance of Ether on exchanges reached the lowest level in the last two years.

Ether balance on cryptocurrency exchanges. Source: Glassnode

The fact that there are fewer coins available on exchanges, especially in the case of Ether, could mean that investors are moving to decentralized finance (DeFi) in search of higher profits. Although it doesn’t stop anyone from selling, this move creates incentives to hold long-term, and the same goes for staking ETH 2.0 to become a validator.

Bears were hit after Ether broke $ 4,000

Ether was trading below the $ 3,000 mark just three weeks ago and This partly explains that the bears opened 89% of their bets that Ether would trade at $ 4,000 or less by October 22.

Total open interest at maturity this Friday is represented by USD 230 million in call options versus a USD 195 million in put options, which is a 27% advantage for instruments from neutral to bullish. Still, this overhead view needs more detail, depending on the expiration price.

Open interest in Ether options for expiration on October 22. Source: Bybt.com

The current long-to-short ratio metric is misleading because Ether’s recent rally will likely erase most of the bearish bets. For example, if the price of Ether sustains above $ 4,000 today at 8:00 am UTC, only $ 22 million in put options will remain available.

The bears need a price below $ 4,000 to balance the scale

Any expiration price above $ 4,000 favors the bulls, although most of the damage occurs above $ 4,200, because the net profit is as high as $ 136 million.

Below are the four most likely scenarios considering current price levels. The data shows how many contracts will be in play on October 22 for bullish (call) and bearish (put) instruments.

  • Between $ 3,600 and $ 4,000: 15,640 call options versus 14,340 put options. The net result is neutral.
  • Between $ 4,000 and $ 4,200: 25,000 call options versus 5,440 put. The net result favors the bulls by $ 78 million.
  • Between $ 4,200 and $ 4,400: 34,180 call options versus 1,890 put. The gain from the bulls rises to $ 136 million.
  • Above $ 4,400: 44,230 call options vs. 60 put options. The bulls have full control, with a profit of $ 186 million.

As shown above, the imbalance favoring either side represents the theoretical potential profit at expiration.

This gross estimate considers the call options used in bullish strategies and the put options exclusively in neutral or bearish operations. However, a trader could have sold a put option, effectively gaining positive exposure to Ether above a specific price. Unfortunately, there is no easy way to estimate this effect.

$ 4,000 is likely to be held, at least until expiration

The bears need a 3% correction from the current price of $ 4,100 to avoid a loss of $ 78 million. Although it may not sound like much at first, traders should also take into account the recent flow of positive news and on-chain metrics.

With less than 10 hours to go before the options expire, the bulls are likely to secure a win by keeping the price of Ether above $ 4,000. As for the bears, focusing on the $ 1.1 billion monthly expiration on October 29 seems like the most logical route.

The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph.com. Each investment and commercial movement involves risks, you must do your own research when making a decision.

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