Ethereum Put/Call Ratio Jumps – Are Bearish Bets Building Up Ahead of Shappella Upgrade?
According to statistics provided by cryptocurrency data analytics and news company The Block, the ratio between the open interest of Ether (ETH) put and call options surged to its highest level since last May at 0.47 on Tuesday.
That may indicate that bearish bets have increased in the market ahead of an expected series of significant improvements to the Ethereum network on April 12 that will, among other things, permit the withdrawal of staked Ether tokens.
Investors prefer to possess call options (bets on the price rising) over put options when the ratio of open interest of put and call options is less than 1. (bets on the price dropping).
Although the ratio is still well below 1, indicating that investors continue to overwhelmingly favour bullish option bets, the recent increase in the ratio indicates that bullish bets have been dramatically reduced recently.
The Put/Call open interest ratio for Ether has increased significantly from its 0.37 level at the end of March.
The spike in the ratio could indicate that more traders are interested in shorting Ether as a result of recent price increases, in addition to possibly indicating bets that there would be a post-upgrade sell-off.
ETH was last trading just above $1,900 after recently making good headway near $2,000 in value.
It’s important to note that the increase in Ether’s put/call ratio may also be explained by a significant decline in the dollar amount of aggregated Ether option open interest since the end of March.
Having recently reached a high of $7.5 billion, open interest in Ether options was last little under $5.0 billion.
At the conclusion of every quarter, open interest frequently declines significantly as investors deal with a wave of option expirations. It appears that bullish call option bets likely dominated the option expiry market.
It will be fascinating to monitor whether and how investors increase their option exposure throughout the upcoming quarter, as well as whether or not this has any impact on how much the put/call ratio decreases once more.
Staked ETH Withdrawals Are Coming – Will ETH Dump?
The Ethereum network will undergo a number of improvements on April 12th, the first of which will allow the withdrawal of staked Ether tokens from the staking smart contract.
The enhancements are referred to as “Shapella” in honour of the union of the names Shanghai and Capella.
Shanghai is the name of a hard split occurring on the execution layer of the Ethereum blockchain, and Capella is the name of an upgrade occurring on the consensus layer.
Assuming that more flexible staking withdrawals will eventually entice many more ETH owners to stake their tokens, analysts see the development as long-term good for the network. However, some have cautioned that there may be short-term price pressure as investors sell ETH tokens that have been stuck in staking contracts for a while.
Prior to the Ethereum blockchain’s merging to proof-of-stake last September, ETH staking was active since late 2020 on the Ethereum beacon chain.
Others have cautioned that after ETH’s astonishing gains of more than 55% since the beginning of the year, a successful Shanghai upgrade may prompt profit-taking, which could result in ETH price decline in the short term.
ETH Bulls Would Likely Pounce on Any Dip
Nonetheless, ETH’s near-term technicals are currently quite favourable. The cryptocurrency is anticipating an impending test of the $2,000 level after recently moving north of a significant resistance area around $1,850.
The cryptocurrency has consistently found strong support at its 21-Day Moving Average in recent weeks. Another bullish indication is the fact that all of its key moving averages are all pointing upward in descending order.
Longer-term technical indicators are also favourable. The 14-Day Relative Strength Index (RSI) for ETH indicates a lower likelihood of short-term profit-taking because it is not yet in overbought territory.
A strong medium-term bullish indication, ETH also experienced a robust comeback from its 200DMA last month.
Another encouraging development for the medium-term technical outlook of ETH is the “golden cross” (occurs when the 50-Day Moving Average crosses above the 200-Day Moving Average) in early February.
Meanwhile, economic tailwinds like the belief that the Fed would lower interest rates later this year to prevent a bank crisis and recession continue to provide strong backing for the cryptocurrency markets.
Bulls are likely to continue purchasing any price falls in Ether in the near future.
The success of Ethereum and its creator, Vitalik Buterin, serves as a testament to the power of cryptocurrencies and their potential to transform the world of finance.