Given the current state of the broader crypto market, some traders may be surprised to learn that Ether (ETH) has been trading in an upward trend for the past 17 days. While the entire cryptocurrency market experienced a 10% drop on September 13th, Ether price remained near the $1,570 support level.

Ether/USD price index. Source: TradingView
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In less than 12 hours, the Ethereum network is about to undergo its biggest upgrade ever and the potential for extreme volatility should not be overlooked. The change to the Proof-of-Stake network will be a game changer for a number of reasons, including a 98.5% reduction in energy use and a reduction in coin inflation.

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During upgrades, there is always the risk of multiple malfunctions, especially in more complex systems such as the Ethereum virtual machine processing. Even though the upgrade over previous testnet versions has been relatively smooth, it is impossible to predict the outcome of decentralized applications and second-layer solutions plugged into Ethereum’s ecosystem.

This is why the $490M Ether option expiring on August 16th will put a lot of price pressure on both sides, even though the bulls are in a slightly better position as Ether nears $1,600.

Most bearish bets are $1,600. are placed below

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Ether’s failure to break the $2,000 resistance on August 14th and its subsequent fall to $1,420 on August 29th signaled the bears’ expectation of a continuation of the downtrend. This becomes apparent as only 12% of put (sell) options are placed above $1,600 for September 16. Thus, Ether bulls are in a better position for the $490 million weekly options expiration.

Total open interest for Ether Options 16 Sep. Source: CoinGlass

A comprehensive approach using a 1.06 call-to-put ratio shows a relatively balanced position with open bets (calls) at $252 million at $252 million compared to $238 million of put (sell) options. Nevertheless, as Ether is currently near $1,600, both sides have equal chances of moving the needle.

If the price of Ether remains below $1,600 on September 16th at 8:00 a.m. UTC, only $27 million worth of these call options will be available. This difference occurs because the right to buy Ether at $1,600 or $1,700 is of no use if trades below that level at expiration.

Bears could make $100 million profit

Below are the four most likely scenarios based on current price action. The number of options contracts available on 16 September for the Call (Bull) and Put (Bear) instruments varies depending on the expiration price. The imbalance in favor of each of the parties constitutes the theoretical advantage:

  • Between $1,400 and $1,500: 33,000 calls vs 2,600 puts. The net result favors the bears by $100 million.
  • Between $1,500 and $1,700: 29,600 Calls vs. 29,000 Puts. The net result is balanced between the bulls and the bears.
  • Between $1,700 and $1,800: 49,200 call vs 3,800 put. The net result supports the bulls by $80 million.
  • Between $1,800 and $1,900: 81,400 Call vs 700 Put. The Bulls increased their profit to $145 million.

This crude estimate considers call options used in bullish bets, and especially put options in neutral-to-bearish trades. Still, this over-simplification disregards more complex investment strategies.

Macroeconomic turmoil may have helped ETH bears

Ether bulls need to maintain the price above $1,500 on Sept. 16 to balance the scales and avoid a potential $100 million loss. However, ether bulls were unlucky after the United States stock markets fell by $1.6 trillion on 12 September. Because of a hotter-than-expected inflation report on September 13th.

There is no way to predict the outcome of an Ethereum merge, let alone its price implications. However, the analysis shows that these three indicators should be watched by traders during the merge event.

No one could ever foresee the consequences of an unexpected delay or the positive impact of a smooth transition because investors could have priced in the merge beforehand, triggering a “sell the news” event. As a result, both the Bulls and the Bears still have a shot at the September 16 weekly option expiration.

The views and opinions expressed here are those of Author and do not necessarily reflect the views of Cryptooshala. Every investment and trading move involves risk. You should do your own research when making a decision.