Ethereum recorded a mixed trading session in the global market as traders made an effort to profit from the dip in cryptocurrency prices over the weekend. QCP insights revealed contrasting trends. Asian investors saw gains initially, but the U.S. session experienced a significant downturn, indicating a surging trend of risk-averse sentiment among traders.
Throughout the day vols eased off significantly and the forward curve climbed back up into double digit yields as the market priced out the de-escalation of the Israeli-Iranian conflict. However, the US session saw another risk-off wave across the board. BTC has been dragged below 63k again. There are two things worth noting: ETH risk reversals have turned very negative in the front-end (-12%) indicating nervous sentiment. The market is short ETH gamma (near-dated options) which means that a sharp move in either direction would be amplified
Optimism in Asian markets rises as Hong Kong welcomes the first regulated Bitcoin and Ethereum spot exchange-traded funds in Asia’s financial hub. BTC surged to nearly 67k.
While global market reactions diverged, a key element to this shift was the movement in Ethereum risk reversals. Recent data showed front-end risk reversals turning to -12%, depicting a strong nervous sentiment among investors. With protective put options outweighing call options by a greater margin, the market anticipates potential downturns.
Short Gamma Exposure Amplifies Ethereum’s Price Volatility
Further adding fuel to the market’s volatility is the current position on ETH gamma. As most traders are betting prices will go down, any significant price movements in Ethereum are likely to be amplified, whether upward or downward. Think of this scenario as a small boat in a storm where the sea represents the market waves. Since all the occupants are leaning to one side [traders shorting], any small movements can tilt the boat upside down.
Therefore, in such treacherous scenarios, both short-term traders and long-term holders should brace for potentially erratic market behavior in the near term.