According to Glassnode, Ethereum derivatives traders are betting on ETH prices above $2,200 and up to $5,000 ahead of the Merge event slated for Sept. 19.
For the first time in history, $ETH Options Open Interest at $6.6B has surpassed $BTC Open Interest at $4.8B.
— glassnode (@glassnode) August 8, 2022
This appears to be a result of traders betting big with call options the Merge scheduled for mid-September.
Read more in our latest analysis👇https://t.co/hMma8TQtzw pic.twitter.com/dyOCgIcLpZ
The on-chain analytics firm notes that, for the first time, Ethereum options' open interest at $6.6 billion surpassed that of Bitcoin at $4.8 billion. This comes as Ethereum derivatives traders continue to make bets on the cryptocurrency in a clear direction, particularly on the impending Merge update.
It notes that while not yet at an all-time high, ETH options open interest is on the verge of doing so, while Bitcoin open interest is still well below the top at just 35% of the ATH.
Call options are much larger than put options, as traders envisage ETH prices above $2,200 and a sizable open interest out to $5,000. However, as the maximum pain price is now approximately $1,350, the greatest number of options would expire out of the money.
This seems to be a quite sophisticated market positioning, which provides additional proof that institutional capital is being placed into the futures and options markets' maturing liquidity, Glassnode stated.
According to the on-chain analytics firm, the volatility smile has shifted to an extremely bullish bias due to the significant buy-side demand for September expiry ETH call options. On the contrary, the shape and scale of the September to October volatility smile indicates a comparatively decreased demand for ETH exposure through options after the Merge event.
Expectations after Merge update
Glassnode reports that traders appear to be using call options to speculate on the price of ETH through September, but futures and options backwardation after September suggests that a "sell-the-news" assumption is in play. The latter indicates that traders have set themselves up for the Merge to be a "buy the rumor, sell the news" kind of event.
Glassnode indicated in its report that with eyes on the Merge for both upside speculation and a sell-the-news event after the fact, futures traders are pricing ETH at a discount post-Merge and are willing to pay a premium for downside protection.
Ethereum trades at $1,779, up 2.63% in the last 24 hours.
Alex Dovbnya
Godfrey Benjamin
Denys Serhiichuk