Is Ethereum local bottom in? Options market signals…

• Options market data indicated that ETH price could have stabilized. 
•  However, market sentiment was still negative amid overhangs from Middle-East tensions. 

Ethereum’s [ETH] price appeared to stabilize after recent volatility following geopolitical escalations in the Middle East that spooked crypto markets. 

According to Jake Ostrovskis, a crypto trader at Wintermute, options market data suggested that a local bottom could be in for the largest altcoin. He noted, 

“From Tuesday (1st Oct.), the largest hedging flow was observable in #ETH in shorter-dated contracts, and these flows are now unwinding as the market looks to firm.”

Source: SignalPlus

Is ETH’s local bottom in?

For context, the hike in hedging flow in short-dated ETH contracts in the past few days meant that traders took hedging positions to protect against price fluctuations, epecially amid Israel-Iran escalations.

They used short-term options to achieve this. 

However, there was a notable unwinding of the hedging flows and declining implied volatility for those short-term options into the weekend.

This suggested that traders were becoming confident of ETH market stability and that hedging was unnecessary. 

Put differently, ETH’s local bottom could soon be in, especially as Israel hasn’t retaliated against the recent Iran attack. 

Source: CryptoQuant

Another data set that suggested ETH might have hit bottom was the hike in long liquidations. The recent plunge liquidated over $50 million worth of ETH long positions. 

In most past trends, a spike in ETH long liquidations coincided with local bottoms. This pattern was seen in March, July and August. 

That said, there was no significant demand from US investors, as demonstrated by a negative reading on the Coinbase Premium Index. More often than not, hikes in the Coinbase Premium Index correlate with a strong ETH recovery. 

Source: CryptoQuant

Ergo, despite potential stability in the ETH market, tracking US investors’ demand could signal whether the bottom was in and if a relief recovery could follow. 

Additionally, a cautious outlook was still apparent, as denoted by ETH’s negative market sentiment.  

Source: Santiment

This highlighted that investors took to the sidelines, probably to wait for Israel’s reactions to last week’s Iran move. At press time, ETH traded at $2.4K, down 8.4% in the past seven trading days.