As the ETH community gears up for the Ethereum Berlin upgrade, the altcoin is trading at $1836 based on price data from CoinMarketCap. ETH’s price is up 2% in the past 24 hours however based on the increasing total value in ETH 2.0’s deposit contract, the circulating supply is expected to drop. A drop in supply could be bullish for the altcoins. This signals a bullish trend reversal in the price rally in the upcoming weeks. However, there is one roadblock that could lead to a price correction, on the 26th of March, $1.15 Billion worth of ETH options are set to expire.
ETH Options open interest by strike price || Source: Bybt
The current optimism that comes from the increasing deposits in the ETH 2.0 contract and the leveraged trades is likely to drop if the options expiry leads to a drop below the $1600 level. When Ethereum is overleveraged and traders are over-optimistic, traditionally there is a transition in the HODLing pattern and a change of hands before the altcoin rallies towards the ATH. In anticipation of the upcoming Ethereum options expiry, the inflow of ETH to exchanges has dropped, hitting a 1-month low based on data from Glassnode. This drop is instrumental to a shortage of supply and the building bullish narrative.
This could be key to supporting Ethereum’s price at the current level, as a shortage offers needed support to the $1800 level. Additionally, DeFi tokens are bouncing back to the 2020 level and ETH’s TVL in DeFi has increased over 8% in 30 days. This is a relatively high TVL growth in the past 90 days. This is a bullish sign for Ethereum’s price rally, at a time when LINK, UNI, COMP are offering close to 10% in less than 24 hours. DeFi tokens with increasing market capitalization and volatility are contributing to the increase in Ethereum’s price and trade volume.
ETH locked in DeFi || Source: Defipulse
The upcoming options expiry could lead to a significant correction and the price may drop below $1600, however, it is expected that once Bitcoin starts trading sideways (ETH and BTC are highly correlated at this point in the market cycle, over 80%) altcoins may start rallying again, led by DeFi tokens and ETH may hit new ATH in the following weeks. However, the immediate impact of the $1.5 Billion options expiry on spot exchanges could be a drop in price and open a buying opportunity for retail traders, before hitting the previous ATH.
