Ethereum bulls and bears fight to win this week’s $2.8B ETH options expiry

Ether (ETH $2,617) is trying to maintain its position above the $2,600 resistance level following a 15.1% gain between Sept. 18 and Sept. 23. Recent macroeconomic data indicating a weakening economy has fueled a rally in the stock market, increasing demand for short-term government bonds. In this context, traders are betting that the upcoming $2.78 billion monthly Ether options expiry on Sept. 27 could solidify the current bullish momentum.

Why Ether price is improving 

The surge in Ether’s price has been primarily driven by a cut in US Federal Reserve interest rates, signaling a shift toward a more accommodative monetary policy. As a result, the S&P 500 index hit an all-time high on Sept. 24. Further bolstering this outlook, a drop in the S&P Global Manufacturing PMI on Sept. 23 heightened investor concerns about the health of the economy.

Ether/USD (blue) vs. US 2-year Treasury yield (magenta). Source: TradingView

Yields on the US 2-year Treasury bond fell to their lowest level in 24 months, as investors sought the relative safety of government-backed assets. The market's current fear of an impending recession has benefitted cryptocurrencies like Ether, which investors view as scarce assets.

However, from a broader perspective, Ether is down 33% over the last four months. This decline follows the highly anticipated US launch of a spot exchange-traded fund (ETF), which ultimately disappointed, resulting in $684 million in outflows, according to data from Farside Investors.

The $2.77 billion in open interest for options includes $1.82 billion in call (buy) options and $0.95 billion in put (sell) options. While the bulls appear to have the upper hand, with $1.47 billion of call options targeting prices of $2,700 or higher, those positions will expire worthless if Ether remains below that level by Sept. 27. Consequently, even with the smaller number of put options, bears still have an opportunity to shift the balance in their favor.

As Ether’s price gains momentum, so too has the demand for its smart contract processing capabilities. The number of transactions on the Ethereum network rose by 15% in the seven days leading up to Sept. 24, pushing the average transaction fee to over $4.50, up from $1.45 just ten days earlier.

Additionally, increased Ether issuance has contributed to the asset’s struggle to reclaim the $3,000 level. According to data from Ultrasound Money, a total of 58,856.4 ETH has been added to the supply over the past 30 days, representing a 0.6% annualized inflation rate. These factors have led to concerns among investors that Ether's upside potential may be constrained, especially with competition from platforms like Solana and BNB Chain, both of which offer transaction costs that are more than 20 times lower.

Bears are well positioned for the $2.8 billion monthly options expiry

In this environment, traders believe that Ether bulls must prevail in the upcoming options expiry to stand a chance of pushing the price back toward the $3,000 mark.

Ether options open interest for Sept. 27, USD. Source: Laevitas.ch

Ether options open interest for Sept. 27, USD. Source: Laevitas.chBelow are the four most likely scenarios based on current Ether price trends, with the potential impact of call and put options for the Sept. 27 expiration. These estimates assume that put options represent bearish positions, while call options align with neutral-to-bullish strategies. However, it is important to note that this is a simplification and does not account for more complex investment approaches.

• Between $2,400 and $2,500: The outcome would favor put (sell) options by $225 million.

• Between $2,500 and $2,600: The result would favor put options by $100 million.

• Between $2,600 and $2,700: The balance shifts, with call (buy) options gaining an advantage of about $70 million.

• Between $2,700 and $2,800: The scenario favors call options, with a net result of $220 million in their favor.

In essence, Ether bulls’ best chance to secure a meaningful advantage is by pushing the price above $2,700 on Sept. 27. However, the path for put options to lock in a $100 million advantage appears clearer, as the current $2,600 support level continues to be tested.

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