Ethereum options data shows pro traders expect strong resistance at $3,600

Ether (ETH) price has rebounded 13% from the January 9 low at $2,950, but it seems too early to describe the move as a cycle bottom. Instead, the larger downward movement prevailed, and while it appears to be primarily related to the price of Bitcoin (BTC), regulatory concerns and more hawkish Federal Reserve policy in the US have also been blamed.

BTC and Ether have been under pressure since regulators focused on stablecoins. On November 1, the US Treasury urged Congress to ensure that issuers of stablecoins are regulated similarly to US banks.

ETH/USD price in FTX. Source: TradingView

Currently, the descending channel formation that started in mid-November is showing resistance at $3850. The average network transaction fee has also risen above $50, and the longer the Ethereum 2.0 upgrade takes place, the better the situation will be for competing chains.

Regardless of the rationale behind the 28% drop in the price of Ether over the past six weeks, bulls missed the opportunity to secure a profit of $300 million at the weekly options expiration on January 14. Unfortunately for them, this scenario of $4,500 and above seems not feasible at the moment.

Ether options collect open interest on January 14th. Source: Coinglass.com

The buy-to-be ratio shows an 89% advantage to the bulls because the $380 million call (buy) instruments have more open interest versus the $200 million put (call) options. The current scale of 1.89 is deceptive because the recent drop in the price of Ether has caused most bullish bets to become worthless.

For example, if the price of Ether remains below $3,300 at 8:00 AM UTC on January 14, then only $24 million call (buy) options will be available, but there is no value in owning the right to buy Ether at $3,300 If it is trading below this price.

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Bears need ETH below $3,300 to lock in $65 million profit

Here are the three most likely scenarios based on current price action. The number of options contracts available on January 14 for the bull (call) and bear (put) instruments varies depending on the ETH expiration price. The imbalance in favor of each side constitutes the theoretical profit:

  • Between $3,100 and $3,300: 7400 calls vs 27800 puts. The net result favors the Bears by $65 million.
  • Between $3,300 and $3,500: 22,200 calls vs 19,300 puts. The net result is balanced between bulls and bears.
  • Above $3500: 32,500 calls vs 15,600 puts. The net result is $60 million in favor of Buying Instruments (Bull).

This crude estimate takes into account buying options used in bullish bets and selling options exclusively in neutral to bearish trades. However, this oversimplification overlooks more complex investment strategies.

For example, a trader could sell a put option, effectively gaining positive exposure to Ether above a certain price. But unfortunately, there is no easy way to estimate this effect.

Bulls don’t get a chance

Ether bulls will have a good advantage of $300 million if the price is above $4,500. However, the current scenario requires a 6% positive move from $3,300 to $3,500 to generate an advantage of $60 million.

Given that there are less than 12 hours until the January 14 options expire, the bulls are likely to focus their efforts on keeping the price above $3,300 to balance out the metrics.

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