Whether you are looking at the long-term or weekly time frame of Ether (ETH), there is little hope for the bulls. In addition to the 69% negative YTD result, the downward channel is putting pressure on the price of ETH, offering resistance at $1,200.
Ether/USD 4-hour price index. Source: Trading View
Regulatory uncertainty continues to weigh on the sector. For example, Starling, a digital bank based in the United Kingdom, announced on November 22 that it will no longer allow customers to send or receive money from digital asset exchanges or merchants. The bank described cryptocurrencies as “high-risk and actively used for criminal purposes.”
Other news regarding the Ethereum ecosystem involved decentralized finance (DeFi) platform AAVE, which was attacked by short sellers on November 22 to profit from undercollateralized loans.
Curiously, a similar exploit occurred in October on the Mango Markets DeFi app. Although it was not a direct attack on the Ethereum network, the attacker found critical flaws in some of the larger decentralized collateral lending applications.
Additionally, Singapore-based cryptocurrency lender Hodlnaut is reportedly facing a police investigation over allegations of fraud. The problems began on August 8 after the lending firm cited a liquidity crisis and suspended withdrawals on the platform.
Finally, on November 22, US Senator Elizabeth Warren attributed the decline of the FTX exchange to 2008 subprime mortgages and penny stocks being used for pump-and-dump schemes. Warren said the collapse of FTX should be a “wake-up call” for regulators to enforce laws on the crypto industry.
This is why a $1.13 billion monthly Ether option expiring Nov. 25 will put strong price pressure on bulls, even as ETH posted an 11% gain between Nov. 22 and Nov. 24.
Most of the bullish bets were placed above $1,400.
Ethereum’s rally to resistance at $1,650 on November 5 gave the bulls a signal to expect the uptrend to continue. This becomes apparent as only 17% of the Nov. 25 call options were placed below $1,400. Consequently, Ethereum bears are in a better position for monthly expiration of $1.13 billion of upcoming options.
Ethereum options pool open interest on November 25th. Source: CoinGlass.
A broader view using a call-to-put ratio of 1.44 shows a skewed picture of bullish open interest calls at $665 million versus $460 million puts. However, with Ether currently hovering around $1,200, the bears are in a dominant position.
For example, if the price of Ether stays below $1,250 at 8:00 AM UTC on November 25, these call (buy) options will only be available in the amount of $40 million. This difference arises because it makes no sense to buy Ether at $1,250 or $1,500 if it trades below that level at expiration.
The Bears could make a $215 million profit
Below are the four most likely scenarios based on the current price movement. The number of option contracts available on Nov. 25 for call (bullish) and put (bearish) instruments varies depending on the expiration price. The imbalance in favor of each side is the theoretical profit:
$1,050 to $1,150: 800 calls versus 20,200 puts. The net result in favor of the bears is $215 million. $1,150 to $1,250: 3,300 calls versus 15,100 puts. The net result favors $140 million in bearish bets. $1,250 to $1,300: 4,700 calls versus 13,200 puts. Net result in favor of the Bears by $100 million. Between $1300 and $1400: 8700 calls versus 8900 puts. The net result is balanced between bulls and bears.
This rough estimate takes into account call options used in bullish bets and put options exclusively in neutral bear trades. However, this oversimplification ignores more complex investment strategies.
Dormant 7-Year-Old Bitcoin Wallet Could Complicate Things For Bulls Trading Ethereum
Ethereum bulls should push the price above $1,300 on November 25 to balance the scales and avoid a potential loss of $215 million. However, Ethereum proponents seem to be out of luck as a bitcoin wallet linked to the 2014 Mt.Gox hack moved 10,000 BTC on November 23rd.
Ki Yong-ju, co-founder of analytics firm Cryptoquant, checked the findings, noting that 0.6% of the funds were sent to exchanges and could represent liquidity on the seller side.
If the bears dominate as the monthly ETH options expire in November, this will likely add firepower for further down bets. Thus, at the moment there is no sign that the bulls can turn the tide and avoid pressure from the two-week descending triangle.
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