Market observers suggest Ethereum (ETH), the leading altcoin, could become a market leader in the coming months, considering its suitability as a fundamental investment in a diversified crypto portfolio. Despite this optimism, the current options market sentiment does not align with these expectations.
According to Amberdata, options tied to ETH have shown a trend of price weakness over three months, with only a slight indication of strengthening in the upcoming months. Options are derivatives that allow buyers to profit from price increases and sellers to hedge against price movements.
ETH’s one-week put-call skew, an indicator of demand for calls relative to puts, dropped to -8 on January 24th, the lowest in three months, suggesting that options market investors are positioning for a price decline of the altcoin king. The negative skew persists across one, two, and three-month indicators.
Market analysts attribute the intensity of ETH sales to the altcoin falling below a critical support level, driving options market investors to engage in selling for additional returns. The founder of Options Insights, Imran Lakha, notes a significant increase in ETH skewness on the leading crypto options exchange Deribit, reflecting the impact of trade flows and the breach of the $2,400 technical support level.
Lakha also points out that the next critical level for ETH is at $2,150, warning that a downward break could lead to further declines. The market’s recent price actions suggest a short-term cautious outlook for ETH, increasing the demand for hedging.