Ether creates history as key metric in ETH options exceeds Bitcoin by 32%

By Shashank Bhardwaj| Aug 4, 2022

Ahead of The Merge, ETH takes over BTC in the options market with an impressive value of $5.6 billion

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For the first time, Ether (ETH) has overtaken Bitcoin (BTC) in the options market as the open interest (OI) of Deribit Ether options, with the former having a value of $5.6 billion and the latter, $4.6 billion.

The formula to calculate OI is adding all the contracts from opened trades and subtracting the contracts when a trade is closed. It is used to understand the strength behind price trends and, by extension, market sentiments. Data from Deribit exchange, which is the world’s biggest BTC and ETH options exchange, shows that ETH options are mainly call options, with a put/call ratio of 0.26. The reason for ETH Put/Call ratios hitting an yearly low could be attributed to the upcoming transition to a proof-of-stake mechanism, The Merge, which is due to take place in the third week September.

As some background, under a put option, the buyers have the liberty to sell their asset at a predetermined price on or before a specific date. While put buyers are bearish, call buyers lean on the opposite side and are more bullish. When a put/call ratio is greater than 0.7 or more than one, it points towards a bearish market sentiment, while a ratio value lower than 0.7 and close to 0.5 indicates that a bullish trend is emerging in the market. Thus, it can be seen that the ETH OI has an underlying bullish sentiment amongst traders.

ETH is taking over BTC in the options market, but there is another issue emerging since the ETH futures quarterly contracts are scheduled to expire in December 2022. With the spot price being higher than the forward price, ETH contracts seem to be battling backwardation. While Ether’s spot and futures price grew to -$8 on Monday, BTC surged back after a rough stint in June with 15 percent growth.

Some analysts are also pointing to an airdrop scenario ahead of The Merge, in case of a chain split. Public sentiments are largely divided on whether there would be a smooth network transition or a hard work when the time comes for The Merge to take effect.

The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash