Ethereum has seen a massive surge in retail demand since the London upgrade went live. ETH’s price losing ground for four days fueled a worrisome mood in the market. However, hopes were soon restored as the top altcoin saw gains of 9.5% at press time.
In spite of these gains, trade volumes for Ethereum’s spot market remained stable and somewhat stagnant, however. In fact, it seemed like excitement in the spot market was fading away as ETH consolidated within the $3k to $3.3k range.
On the other hand, the Futures market flashed some interesting trends. These can be used to gauge the bullish narrative building up for Ethereum in the mid-short future.
Ethereum to 5k by year-end?
While the spot market has been stealing the limelight for the last couple of weeks, the Options market has been an underdog in this bullish run for ETH. A recent Glassnode report highlighted that interest in Ethereum’s Options markets has expanded over the last few weeks as traders deployed capital to express a directional view or hedge existing positions.
Open Interest in the Options market was $3.9 billion on 18 August, having climbed to $4 billion at press time.
Source: Glassnode
Open interest represents the value of contracts that aren’t yet settled or exercised. A look at longer-dated Options with end-of-year expiration helps gauge what the Options market expects of future price performance.
The report highlighted a strong interest in out-of-the-money (OTM) calls at the ETH $5,000 level for the end of year (December 31) contracts. Over 43k call options were open at this strike and expiry, with non-trivial Open Interest also at ETH strike prices in excess of $10k.
Source: Glassnode
This might be an early indicator
Ethereum’s Implied volatility (IV) v. Realized volatility (RV) has been an important early indicator for a rally. Historically, whenever the RV has noted a sharp vertical downtick, as seen during April 2021 and December 2020, a bull run has followed soon after.
On 19 August, the difference between the IV and RV was the least it has been since 28 May. There were high chances that IV would flip RV in the days to come, initiating a bull run for ETH.
Source: Skew
Ethereum’s RV saw a sharp downtick and fell from 6.9 to 5.9 in just one day – A sign that traders were expecting more volatility. Once the IV flips RV, Options traders will be expected to move in tandem.
It’ll be interesting to see Ethereum stun its traders once again. Whether it’ll be positive or negative will be a lot clearer once the IV and RV align. Either way, these metrics will be important for the top alt’s price trajectory in the days to come.
