Ethereum has seen a massive increase in retail demand since the London update went live. ETH The price that lost ground for four days fueled a worrying mood in the market. Hopes were soon restored, however, as the major altcoin posted 9.5% gains at press time.
However, despite these gains, trading volumes for the Ethereum spot market remained stable and somewhat stagnant. In fact, it looked like the excitement in the spot market was fading as ETH consolidated within the $ 3k to $ 3.3k range.
On the other hand, the futures market showed some interesting trends. These can be used to gauge the bullish narrative that is building up for Ethereum in the medium to short term future.
Ethereum at 5k by the end of the year?
While the spot market has been stealing the spotlight for the past few weeks, the options market has been a loser in this bull run for ETH. A recent Glassnode report highlighted that interest in the Ethereum options markets has expanded in recent weeks as traders deployed capital to express directional vision or hedge existing positions.
Open interest in the options market was $ 3.9 billion on August 18, having risen to $ 4 billion at press time.
Open interest represents the value of contracts that have not yet been settled or exercised. A look at options with a longer date expiring at the end of the year helps to assess what the options market expects from future price developments.
The report highlighted strong interest in out-of-the-money (OTM) calls at the $ 5,000 ETH level for year-end contracts (December 31). Over 43k call options were open on this strike and expiration, with non-trivial open interest also at ETH strike prices above $ 10k.
This could be an early indicator
Ethereum’s Implied Volatility (IV) vs. Realized Volatility (RV) has been an important early indicator of a rally. Historically, whenever the RV has noticed a sharp vertical drop, as seen during April 2021 and December 2020, there was a bull run shortly thereafter.
On August 19, the difference between IV and RV was the smallest since May 28. There was a good chance that IV would switch to RV in the next few days, starting a bull run for ETH.
Ethereum’s RV saw a sharp decline and fell from 6.9 to 5.9 in just one day, a sign that traders were expecting more volatility. Once the IV switches to RV, options traders are expected to move in tandem.
It will be interesting to see Ethereum stun its traders once again. Whether it will be positive or negative will be much clearer once the IV and RV line up. Either way, these metrics will be important to the price trajectory of the top alternative in the days to come.
This is a machine translation of our English version.
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