Ether (ETH) is up 88% since November, surprising even the most optimistic of investors as the highest altcoin hit a 2020 high at $ 750.
Apart from the upcoming Launch of CME ETH Futures scheduled for February 8, the phenomenal growth of the total value locked (TVL) in decentralized financial protocols also played a big role.
In fact, as the above data indicates, investors are even more confident that Eth2 will be a success, despite the real potential of implementation delays and hurdles.
Another possible bullish factor in the background is the recent one 2 years low in ETH miners’ balances. This certainly eases potential selling pressure and opens room for further bullish continuation.
Over the past three months, outstanding interest on Ether options is up 150% to a total of $ 880 million. This incredible increase happened when the cryptocurrency broke the USD 700 resistance and hit its highest price since May 2018.
The put-call ratio turned bullish
By measuring whether more activity is taking place via call (buy) options or put (sell) options, one can gauge general market sentiment. Generally, call options are used for bullish strategies, while put options are used for neutral to bearish.
Despite the recent price increase, the put / call ratio has fallen significantly. This move indicates that the more bullish call options dominated volumes. One should expect the exact opposite when traders lock in their profits or prepare for a potential downside.
That’s a striking contrast to the 0.94 level two weeks ago, indicating that put options were well balanced against neutral to bullish call options.
Option data shows that traders expect another 20% rise to $ 880
The odds of current options trading are calculated according to the Black & Scholes model. Deribit exchange presents this information as ‘delta’. Basically, these are the percent-based odds for each attack.
According to the data above, the $ 880 strike for January 25 has a 34% chance of occurring, while the most traded $ 960 strike by the options pricing model is 25% odd.
Note that the statistical model is generally too conservative as even the $ 720 strike keeps only 59% odd.
The March ending is also extremely bullish
With 86 days to go until the end of March 2021, the odds of the Ether price going above $ 880 are even higher.
The same $ 880 strike is now 49% odd on Black & Scholes’ pricing model, while the staggering $ 1,120 expiration date is 33%.
As shown above, for March 2021 options are trading in relevant volume and costing $ 114 each. These data are indisputable evidence of traders’ optimistic sentiment.
Futures market data reflects a bullish sentiment
An even better way to gauge the sentiment of professional investors towards the market is to analyze premium in the futures markets. This is measured by the difference between longer term contracts and the current Ether (ETHbargain price.
The chart above shows that the indicator peaked at 5.8% on December 19 and hit the same level again on December 28 when the ether price hit a multi-year high. A sustained futures premium above 3.5% reflects optimism, although it is far from excessive.
The current rate of 4.3% equates to a premium of 18% on an annual basis and is significantly higher than the level of previous months. This shows that despite hitting a swing high at $ 750, professional traders remain confident in the future potential of Ether.
It may be too early to determine if the derivatives market will ease optimism, but for now the bulls seem to be in control.
While there is always the possibility of a correction in the ether price, it is unlikely to be strong enough to cause damage as the market is not showing any signs of undue optimism.
The views and opinions expressed here are solely those of the author and do not necessarily reflect Cointelegraph’s opinion. Every investment and trade move carries risks. You should do your own research when making a decision.