Ether (ETH) Options Show Confidence, No Correction In Sight

Ether (ETH) options listed on Deribit are signaling positive price gains amid approval of spot ETH exchange-traded funds (ETFs) in the United States.

Data tracked by Amberdata shows that short-term and long-term calls are trading at a volatility premium over puts, a sign that investors are expecting price increases immediately after launch and in the months ahead.

The bias against call options runs counter to concerns about the typical “sell the truth” narrative. A sell the truth pullback is a price decline that occurs when early investors profit from the occurrence of a highly anticipated event.

The crypto market’s long wait for spot ether ETFs is over after the U.S. Securities and Exchange Commission (SEC) approved their listings, opening a major door for institutional investors to invest billions of dollars in the second-largest cryptocurrency.

Valentin Fournier, an analyst at digital asset research firm BRN, said: “We recommend maintaining exposure to the positive momentum in crypto markets, but we prefer bitcoin over ether as we believe ETFs are already priced in. We expect ether to fall to levels between $2,800 and $3,100 before rallying to $4,000 by September.”

Markus Thielen, founder of 10x Research, also expressed a similar view in his press releases.

Of course, these concerns are not without foundation. Bitcoin, the leading cryptocurrency by market value, had fallen 20 percent in the nearly two weeks since spot ETFs began trading on Jan. 11. But the cryptocurrency’s options market had warned of a pullback the day before, having turned bearish.

Similarly, the listing of a futures-backed BTC ETF in October 2021 and CME BTC futures in December 2017 signaled major bull market highs.

For Ether ETFs, keeping inflow expectations low seems to be beneficial for the cryptocurrency. Crypto market maker Wintermute announced yesterday that inflows over the next 12 months could be 62% less than the $16 billion attracted by bitcoin ETFs in six months. Many investment banks have continued to announce similar estimates since the second quarter.

Additionally, the ETH price did not experience any significant “buy the rumor” volatility leading up to the ETF launch, weakening the possibility of a “sell the fact” correction. According to CoinDesk data, while BTC hit new highs in the first quarter, ether was able to rally to $4,000, well below its record high of $4,866, and is currently trading around $3,525.