Ethereum
350,000 Ethereum (ETH) options with a maximum pain point of $3,200 will expire today
Given Ethereum’s current price trajectory, the approval of Ethereum spot ETFs in the United States yesterday, May 23, appears to be a buy-rumor-sell-information scenario. With Ethereum down over 4%, around 350,000 ETH options are set to expire today, Friday May 24.
These soon-to-expire ETH options have a Max Pain price of $3,200 and a Put Call ratio of 0.58, and they have a staggering notional value of $1.3 billion.
Effects of Ethereum ETFs
The maximum point refers to the price level at which option holders would suffer the maximum financial loss. Meanwhile, Ethereum saw considerable volatility leading up to today’s expiration.
Ethereum has seen significant rallies recently due to speculation around a potential ETH Spot ETF approval. Ether climbed above $3,000, surpassing the $3,900 threshold and approaching $4,000 as traders accumulated coins in anticipation of a bolder rally.
However, right after the Ethereum ETF spot launch, ETH’s rally stalled, replaced by a 4% drop. Ethereum is now trading around the $3,700 threshold. Despite this decline, Ethereum has shown strong performance in recent weeks, often outpacing Bitcoin’s rally.
This bullish sentiment was primarily driven by progress in ETF development, which resulted in a dramatic 20% rise in the price of Ethereum in a single day.
The implied volatility (IV) of the Ethereum short-term option reached 150% during this period. This figure was significantly higher than Bitcoin’s IV for the same period, increasing traders’ expectations for price movement.
At the same time, analysis of block trades and market structures reveals sustained bullish sentiment for Ethereum despite the recent decline.
However, maintaining consistently high IV levels for each primary trimester has proven difficult. This scenario suggests that while the market is optimistic, it is also volatile and unpredictable.
In this context, traders might consider calendar spreads as a more favorable strategy. These spreads can help manage risk and capitalize on volatility without relying solely on sustained high IV levels. They usually involve buying and selling options with different expiration dates.
Notably, the approval and launch of the Ethereum ETF had a notable impact on the market, leading to increased volatility. Just before the ETF was approved, Ethereum’s price fluctuated significantly, leading to over $132 million in long liquidations.
This liquidation event highlights the risks and rapid changes in market sentiment that can occur during such high-profile developments.
Potential for sales or profit-taking activities
As the 350,000 Ethereum options expire today, market participants will closely monitor price action around the Max Pain point of $3,200.
Meanwhile, crypto analyst Ali Martinez has observed increase Ethereum deposits in digital asset exchange wallets. This trend suggests that Ethereum holders could be preparing for a major sell-off or an increase in profit-taking activity.
Additionally, the Tom DeMark (TD) Sequential Indicator is sending a sell signal on the Ethereum daily chart. A new green candlestick appeared on the daily chart, suggesting increased selling pressure. This could lead to a price retracement between one and four daily candlesticks. This could also trigger a new downtrend before the uptrend can resume.
Despite these bearish signals, Ethereum’s recent price correction could present a dip buying opportunity for long-term investors. Historically, these corrections have been viewed as entry points by those with a long-term perspective on Ethereum’s potential.
Although the US SEC has approved 19b-4 filings for an Ethereum ETF, the S1 filing is still pending. This registration process should take a few more weeks. Funds are waiting for official listings before a notable inflow is recorded, which could trigger a rally.
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