Data on derivatives of Ethereum suggests traders expect prices to be above $ 2,000


Related articles

After Ether hit a new high of $ 1,477 on January 24, the price of Ether (ETH) was lowered to $ 1,206 on January 27. However, according to futures markets, the bulls remain confident that $ 2,000 is still within reach.

The open interest rates on neutral to bearish put options above $ 1,360 are irrelevant, and only 2,540 ETH options, which equates to an open interest of $ 3.4 million, are above that price level. That being said, more than 99.5% of open positions for put options become worthless if ETH trades at $ 1,360 or more.

ETH options aggregate open interest by strike. Source: Bybt

As shown above, the data appears to be balanced for both call and put options as the open interest indicator only favors bulls by 34%. The data also shows that Ether’s 79% rally since the start of the year has really weighed on the bears.

Currently, the neutral to bullish call options from USD 1,000 to USD 1,340 amount to 59,730 ETH. That’s $ 79.6 million in open positions, excluding the strikes below that range. So, aside from dominating a 23 to 1 ratio, the bulls have every incentive to push the price higher.

For example, if ETH rises above $ 1,440, another 56,000 call options come into play, compared to just 7,600 put options. This corresponds to further open positions in the amount of USD 70 million, which favor the neutral to bullish call option. The imbalance would then run to $ 152 million, completely erasing the bears’ hopes.

Not every open option will expire in the next few months.

ETH options aggregate open positions until expiration. Source: Bybt

The 2021 expiration calendar holds 50% of the open positions on February 26th and March 26th, although longer-term options tend to gain relevance as the year progresses.

Futures premium signals traders are bullish

The futures premium measures how expensive longer-term futures contracts are compared to the current spot in traditional markets. It can be viewed as a relative expression of investor optimism, and fixed calendar futures typically trade at a slight premium over regular spot exchanges.

These fixed income futures contracts should trade at an annualized (base) premium of 10% to 20% in healthy markets, and any number above this range indicates extreme optimism. In the meantime, the lack of a premium is a signal that traders may be bearish.

March 2021 ETH futures premium. Source: NYDIG Digital Assets data

The graph above shows that the premium was lowered dramatically on January 21, when ether fell more than 20% to test levels below $ 1,100. More recently, on Jan. 27, the premium hit an annualized rate of 8.7% near neutral to bearish levels.

This data is more than enough evidence to back up the claim that the options market is bullish. Even during the worst sell-offs in recent months, the derivatives markets have performed well.

The current rate of 2.9% equates to a healthy 20% annual premium, which indicates that bulls don’t expect any problems.

Top traders have room to add long positions

Data provided by the exchange underscores the long-to-short net positioning of traders. By analyzing the position of each local customer, perpetual and futures contracts, one can get a clearer view of whether professional traders are bullish or bearish.

Even so, there are occasional discrepancies in methodology between different exchanges so viewers should monitor changes instead of absolute numbers.

Top traders on the ETH exchanges long-short ratio. Source: Bybt

The top trader indices at Binance and Huobi were in ETH net short positions last week. OKEx is notable for the fact that top traders have increased long-to-short over the past five days and currently prefer long positions by 56%.

This shows that there is little evidence of over-optimism among top traders, while there is room for leverage in the event of an upcoming bull run.

In summary, both the ETH options and the futures markets are showing clear signs that traders are incredibly optimistic about Ether for the next few months.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.