Ethereum derivatives data suggests traders expect prices above $2,000


After marking a new $1,477 high on Jan. 24, Ether’s (ETH) price was shaken down to $1,206 on Jan. 27. But according to derivatives markets, bulls remain confident that $2,000 is still within reach.

The neutral-to-bearish put options open interest above $1,360 is irrelevant, and only 2,540 ETH options, equivalent to $3.4 million in open interest, is above that price level. That being said, more than 99.5% of the put options open interest will become worthless if ETH trades at $1,360 or above.

Ethereum derivatives data suggests traders expect prices above $2,000
ETH options aggregate open interest by strike. Source: Bybt

As shown above, data from both call and put options seems well balanced, as the open interest indicator favors bulls by a mere 34%. The data also shows that Ether’s 79% year-to-date rally has really taken a toll on bears.

Currently, the neutral-to-bullish call options ranging from $1,000 to $1,340 amount to 59,730 ETH. That amounts to $79.6 million in open interest, not counting those strikes below such range. Therefore, apart from dominating on a 23-to-1 ratio, the bulls have every incentive to keep pushing the price up.

For example, if ETH rallies above $1,440, another 56,000 call options come into play, compared with a mere 7,600 put options. This equals another $70 million in open interest favoring the neutral-to-bullish call option. The imbalance would then amount to $152 million, completely extinguishing bears’ hopes.

Not every option open interest is set to expire over the next couple of months.

ETH options aggregate open interest by expiry. Source: Bybt

The expiry calendar for 2021 holds 50% of the open interest on Feb. 26 and Mar. 26, although longer-term options tend to gain more relevance throughout the year.

Futures premium signals traders are bullish

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

These fixed-month futures contracts should trade with a 10% to 20% annualized premium (basis) in healthy markets, and any number above this range denotes extreme optimism. Meanwhile, the lack of a premium is a signal that traders may be bearish.

Ethereum derivatives data suggests traders expect prices above $2,000
March 2021 ETH futures premium. Source: NYDIG Digital Assets Data

The above chart shows that the premium was cut drastically on Jan. 21 as Ether plunged by more than 20% to test sub-$1,100 levels. More recently, on Jan. 27, the premium reached an 8.7% annualized rate near neutral-to-bearish levels.

This data is more than enough evidence to support the claim that the options market is bullish. Even during the worst sell-offs over the last couple of months, derivatives markets have held a positive stance.

The current 2.9% rate equals a healthy 20% annualized premium, indicating that bulls are not anticipating any problems.

Top traders have room to add long positions

Exchange-provided data highlights traders’ long-to-short net positioning. By analyzing every client’s position on the spot, perpetual and futures contracts, one can obtain a clearer view of whether professional traders are leaning bullish or bearish.

With this said, there are occasional discrepancies in the methodologies between different exchanges, so viewers should monitor changes instead of absolute figures.

Exchanges’ top traders ETH long-to-short ratio. Source: Bybt

The top traders indices at Binance and Huobi have been in net short ETH positions over the past week. OKEx stands out, as its top traders long-to-short has been increasing over the past five days and currently favors longs by 56%.

This shows that there is little evidence of excessive optimism by top traders while leaving room for leverage in the case of an upcoming bull run.

To sum up, both ETH options and futures markets show clear signs that traders are incredibly bullish on Ether for the next couple of months.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.