Ethereum has led an impressive rally for the altcoins this year, a contributing factor to the diminishing dominance of the world’s largest cryptocurrency, Bitcoin. However, this trend appeared to take a pause.
TWJ had earlier reported that a record-breaking 460,000 ETH options expired on the 25th of September which caused massive volatility in the underlying asset’s price movement as traders sought to hedge exposure on these positions, work out of them, or possibly take action in the spot market.
Sluggish Ethereum Options Trading Activity
The Ethereum options market stagnated after its monthly expiration last week. This caused a significant decline in the open interest further indicating an overall decrease in trading activity.
According to LongHash, if the number of investors betting for or against Ethereum increases, then the open interest is most likely to rise up. However, this was not observed lately since throughout the last month, the volume of Ethereum in the options market took a plunge, so did its open interest.
This signaled that the traders were not anticipating any dramatic price action and significant volatility in Ethereum in the near future.
An Advantage for Bitcoin?
According to the latest Skew chart, the spread between the six-month implied volatility [IV] for Ether and Bitcoin dropped more than 20% in the last four weeks. Correspondingly, the six-month realized volatility [RV] spread for the two coins bounced back up to levels last seen in August. This further indicated that the market participants do not expect significant dispersion between the two largest crypto-asset. In short, Ether could strongly mimic Bitcoin’s price movement in the near term.
Previously, the altcoin took market leadership from Bitcoin to lead significant rallies, a trend that was primarily catapulted the extensive activity in the DeFi sector. But the latest reversal is likely to hand over the leadership to Bitcoin. What does this mean?
Bitcoin has matured significantly over the past couple of years. What has further strengthened the crypto-asset was the ongoing pandemic which initially led to a serious fall in March, but recovered at a much faster pace than the global traditional market. One of the drivers was also the entry of many sophisticated players in the market.
And this trend could further help Bitcoin make a comeback and increase its dominance in the market.
What does this mean for Ethereum?
Well-known trader of Amsterdam Stock Exchange, Michael van de Poppe, explained that there could be two potential scenarios for the coin. ETH could breach the $375-level and trade close to the next resistance level at $415. However, if that does not materialize, the could drop below crucial support levels such as $350 which could further intensify the risk of falling to $280.
All right, this one is moving upwards and that's good.
However, the crucial hurdle is around $366-375 to break.
If that breaks, $ETH is ready for $415.
If not, I assume $280 as a likely possibility for further corrective movements in Q4. pic.twitter.com/W0T005kbRt
— Crypto Michaël (@CryptoMichNL) September 28, 2020
Only time will tell if Ethereum will be able to break this impasse.