Ethereum paved the way for lower transaction costs with its Berlin upgrade on April 15th. However, traders already know that the Ethereum Improvement Proposal 1559 is the most anticipated and controversial change planned for the upcoming London hard fork.
The EIP introduces a base fee that is burned on a transaction while miners are given a tip for validating transactions. This move would put a lot of pressure on miners’ revenues, but the proposal aims to tame the skyrocketing gas charges that have plagued the network for the past two years.
The recent rally and conflict with miners have increased the demand for protection options
Both the Berlin and London upgrades are required to meet the non-inflationary emissions plan that forms the basis of the network’s Ethereum 2.0 proof-of-stake network. Given the cumulative gains of 153% in 2021, investors should therefore be expected to use short-term options more actively as a hedging instrument.
Ether April 23 aggregate options. Source: Bybt
While the neutral bullish call option (call option) provides the buyer with upward price protection, the opposite occurs with the more bearish put (sell) options. By measuring the risk exposure of each price level, traders can gain insight into the positioning of bullish or bearish traders.
The total number of contracts due to expire on April 23 is $ 101,300, or $ 250 million at the price of Ether (ETH) of $ 2,450. However, the number of bulls appears to be lower as the call options represent only 35% of the open positions.
Bulls have a slight advantage after the recent rally
While the first picture seems bearish, keep in mind that the put (sell) options below $ 2,000 will be almost worthless in less than eight days. A more even situation emerges if the 17,600 bearish contracts currently trading below $ 10 are removed.
The neutral to bearish put options still dominate with 58% of the remaining 80,500 ether contracts. Taking the current Ether price into account, the open interest is $ 197 million, giving the bears a $ 30 million advantage.
Bears may have been caught off guard when Ether hit a new all-time high near $ 2,500. A meager 6,600 ether put options leaves $ 2,450 and more, which is only 10% of the total.
The call options now range from neutral to bullish to 19,500 ether contracts. That difference equates to an open interest of $ 31 million in favor of bulls. Despite being small, bears would only take a similar lead if the price of ether fell to $ 2,200 on April 23.
It’s worth noting that $ 30 million is large enough to incentivize the 10 percent price movement required to bring the price of ether down to $ 2,200 and shift the balance in favor of the bears.
These data suggest that the upcoming expiration of $ 250 million worth of options will take place on April 23 without causing much fuss.
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