Whimsical Fluctuations: Analysts Warn Of Impending ETH Price Volatility Due To Ether Derivatives Conditions

• Analysts suggest that market conditions in the Ether derivatives market may magnify the asset’s upcoming price fluctuations.
• According to analysts, Ether risk reversal trades indicate a negative outlook on the asset’s short-term price trajectory.

Multiple analysts observe that the current state of the ether derivatives market could trigger a notable short-term price shift in the asset.

“The market is short ether gamma, near-dated options, which means that a sharp move in either direction would be amplified,” QCP Capital analysts said.

Gordon Grant, a crypto derivatives trader, noted similar conditions, identifying a pronounced surge in short-term volatility as Ether saw a larger sell-off compared to Bitcoin recently.

“You can see the material divergence in ether versus bitcoin. Term structure remains sharply inverted with a kink demonstrating a demand for gamma and a premium for ether gamma over bitcoin and a premium for ether gamma over ether vega,” Grant told CoinNerd.

Gamma measures the rate of change between an option’s implied position and the underlying asset’s price. A higher gamma signifies more significant changes with a given asset’s price movement. Meanwhile, Vega represents the alteration in an option’s value with changes in its implied volatility.

Ahead of short-term expiries, more traders are purchasing put options. Deribit’s data on ether options open interest reveals that the current put-call ratio for upcoming expirations, particularly for this Thursday’s expiry, stands at 1.04. A put-call ratio exceeding 1.0 indicates a preference for put options, indicating bearish sentiment in the market.

A call option grants its holder the right, but not the obligation, to purchase the underlying asset, making it a bullish bet. Conversely, a put option gives its holder the right to sell the asset, representing a bearish bet.

Traders buying put options gain gamma because the option’s delta decreases as the ether price drops, enabling them to profit from downward price movements.

Ether is currently facing short-term negative sentiment.

According to QCP Capital analysts, indicators from ether risk reversal trades signal a strongly pessimistic outlook on ether’s near-term price movements. The analysts added, “Ether risk reversals have turned very negative in the front-end, at -12%, indicating nervous sentiment.”

Risk reversal trades are complex strategies utilized by traders to take a stance on an asset’s price direction while managing the risk of adverse price fluctuations.

The analysts further noted that crypto markets are becoming “increasingly nervous” with the downside skew in ether risk reversals deepening, partly due to macroeconomic conditions. They stated, “We expect this nervousness to persist as the Iran-Israeli conflict develops, and the risk-off sentiment has been exacerbated by weakness in US equities too.”

Ether saw a decrease of approximately 3.4% in the past 24 hours, trading at $3,073 as of 10:31 a.m. ET, according to CoinNerd’s Price Page.

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* We hope this information will help you in your investment process, but this is not investment advice. Every investment carries risk, especially in this industry, so DYOR before making a decision.