Ether’s Price Falls to Six-Week Low as Traders Bet on Weakness
Ethereum’s native token Ether (ETH) reached a six-week low on Tuesday, with traders in the options market predicting further price weakness in the next six months. Ether fell to $1,815, the lowest since June 21. The negative skew between implied volatilities for call and put options indicates a bias for put options, suggesting bearish sentiment in the market. This comes as the U.S. Securities and Exchange Commission (SEC) considers categorizing most cryptocurrencies as securities and subjecting them to stricter regulations.
Key Points:
- Ether’s price hits a six-week low at $1,815.
- Negative skew in options market indicates bias for put options.
- SEC’s scrutiny on cryptocurrencies adds to bearish sentiment.
- Ethereum’s average monthly revenue has dropped to $178 million, significantly lower than during the bull market.
- Staking yield in the Ethereum network is now below the benchmark U.S. interest rate.
According to Markus Thielen, head of research and strategy at Matrixport, Ether’s price appears overvalued compared to its declining revenues. Ethereum’s average monthly revenue has dropped to $178 million, a 364% decrease from the bull market days of 2021. Additionally, staking coins in the Ethereum network for rewards is less rewarding now, with the average staking yield of 4.98% being lower than the U.S. interest rate. Thielen suggests that Ether’s fair value may be closer to $1,000, a 46% decrease from the current price of $1,856.
Thielen proposes a zero-cost strategy to position for a potential decline in Ether’s price. This strategy involves buying an at-the-money (ATM) Ether put option with a December expiry and financing it by selling an ATM Bitcoin call option with the same expiry. By doing this, traders can take advantage of Ether’s overvaluation based on its revenue-generating capabilities.
Hot Take:
Ether’s price decline and the bearish sentiment in the options market indicate concerns about its overvaluation. With declining revenues and less rewarding staking yields, some analysts believe that Ether’s fair value may be significantly lower than its current price. Traders can consider a zero-cost strategy to position themselves for a potential price decline, taking advantage of Ether’s overvaluation compared to Bitcoin.
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