Ethereum options data show pro traders ready to go long into ETH’s Merge

Ether (ETH), which is currently down 11.5% in seven-days, has been confirmed as a proof of-stake (PoS), transition from “Ethereum merging” in September. Developer Tim Beiko suggested Sept. 19 for the tentative target date during the Ethereum core developers conference calls on July 14.

Since the transition from energy-intensive mining has been delayed for many years, the journey towards scalability through sharding technology — parallel processing ability — is still to be planned. Some analysts still expect Ether’s value to rise due to the network’s monetary policies.

Vivek Raman, an Ethereum researcher, highlighted the effects of the “supply-shock” and said that the “merge” will “reduce ETH’s total supply by 90 percent,” even though there is no benefit to transaction fees in the current stage.

Ether’s sharp correction could partly be due to regulatory uncertainty. Yuga Labs has been accused of “inappropriately inducing the community to purchase nonfungible tokens, (NFTs), and the ApeCoin token (APE).” The law firm also claims Yuga Labs used endorsements and celebrity promoters to “inflate” the prices of the BAYC NFTs as well as the APE tokens.

Infrawatch PH a think tank in Philippines filed a complaint on July 26 to the local regulator, asking them to take action against Binance’s activities. The petition alleges that the exchange does not have a Manila office and uses only third-party companies for technical and customer support services.

Options traders are not optimistic

Investors should examine Ether’s data on derivatives markets to see how arbitrage desks and whales are placed. If traders charge too much for downside or upside protection, the 25% delta skew can be a sign.

The skew indicator would rise above 10% if market participants were worried about an Ether price crash. Generalized excitement, however, reflects a negative 10% Skew.

Ether 30-day options 25% delta-skew: Source:

On July 16, the skew indicator left the “fear zone” as Ether reached $1,300. This was Ether’s highest level in 33 consecutive days. The improvement in traders’ sentiment did not instill confidence, as the metric has remained at the “neutral threshold”. ETH option traders currently assess similar downside and upside price movement risks.

The sentiment has shown a slight improvement over the short-to-long data

The long-to-short net ratio of top traders excludes externalities that could have only impacted options markets. This metric collects data from clients of exchanges on spot, perpetual, and quarterly futures contracts. It provides better information about how professional traders are placed.

Sometimes there are methodological differences between exchanges. Therefore, readers should be able to monitor changes rather than absolute numbers.

Top traders in exchanges Ether long-to–short ratio Source: Coinglass

According to the long-toshort indicator, even though Ether failed to break the $1600 resistance, professional traders didn’t reduce their leverage long positions from July 19 to 26.

The Binance traders’ long-to-short ratio did not hold at 1.13 but it finished the period at near 1.05. Huobi saw a slight decrease in its long to short ratio. The indicator moved from 1.02 down to 0.98 in seven trading days.

The OKX exchange however saw a dramatic increase in the metric, going from 0.88 on July 19, to 1.37 today. In seven days, bullish traders had an average increase in their positions.

Despite Ether’s 11.5% correction, there hasn’t been any significant shift in the leverage positions of whales or market makers since July 19. Options traders are pricing the same risks for Ether’s upside- and downside moves while leverage futures players have slightly increased their bullish bets. ETH has not broken the $1,600 resistance but overall derivatives metrics are positive.

Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.

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