The ripples in the crypto market are amplifying as Ethereum‘s native token, Ether (ETH), fell to a six-week low, stirring a sense that bearish months could lie ahead. With a plunge to $1,815 during Asian trading hours, a level unseen since June 21, a subtle unease might permeate even the most steadfast of crypto-enthusiasts.
It’s not just the plummeting graph causing alarm but also the options market’s behavior. Ether’s six-month call-put skew, an indicator of the spread between implied volatilities for call and put options expiring in 180 days, slipped to -0.91, its lowest since June 15. This skew towards the negative reveals heightened support for put options. Put option buyers gain the right but not the obligation to sell the underlying asset at a predetermined price until a specific date. Though they don’t predict prices themselves, any profound tilt away from call buyers, who have a bullish approach, signals a possible bearish sway in the market.
On another front, the U.S. Securities and Exchange Commission (SEC) is considering tagging most cryptos save for Bitcoin as securities, which invites stricter oversight. These potential regulatory reigns hover ominously over Ethereum and other altcoins.
Markus Thielen, head of research and strategy at Matrixport, a crypto services provider, notes that Ether’s price seems overly inflated when juxtaposed with its contracting revenues. A startling 364% slump from the $826 million seen during the boom days of 2021 has reduced Ethereum’s average monthly revenue to $178 million.
Further, staking, or committing coins on Ethereum’s network for rewards, isn’t as lucrative now since the average staking yield of 4.98% pales against the benchmark U.S. interest rate of 5.25%-5.5%. According to Thielen, Ether’s valuation should be closer to $1,000 which suggests a potential 46% drop from the existing price ($1,856).
While the road to such a decline isn’t clear-cut, Thielen suggests a zero-cost, not zero-risk way to position oneself for it – by buying a December expiry at-the-money (ATM) ether put financed by selling an ATM bitcoin December expiry call.
Is Ether’s recent downward spiral indicative of an impending downfall for the crypto market, or are these merely market jitters that will soon flatline? Time, a famously elusive ally in the realm of crypto-investment, holds that answer.
Source: Coindesk
