The Possibility of Reversal Signals in Ethereum’s Local Bottom According to Options Market Data
After experiencing turbulence in the wake of geopolitical tensions in the Middle East, Ethereum’s price seems to have found some stability.
Analysis by Jake Ostrovskis, a trader at Wintermute, indicates that the options market data is hinting at a potential local bottom for the leading altcoin.
Ostrovskis observed a surge in hedging activity in short-term ETH contracts, but this trend is now reversing as market conditions improve.
Has Ethereum Reached its Local Bottom?
Traders increased their hedging activity in short-term Ethereum contracts as a precaution against volatility spurred by the Israel-Iran tensions.
However, recent data shows a decrease in hedging activity and implied volatility for these short-term contracts, suggesting growing confidence in Ethereum’s stability.
This shift indicates that Ethereum may have found its local bottom, especially given the absence of retaliation from Israel in response to Iran’s recent actions.
Another indicator supporting the idea of Ethereum hitting bottom is the surge in long liquidations, wiping out over $50 million in ETH long positions.
Historically, peaks in ETH long liquidations have coincided with local bottoms, as seen in previous instances in March, July, and August.
Yet, the lack of substantial demand from US investors, as reflected in the negative reading from the Coinbase Premium Index, raises questions about the potential for a strong recovery in Ethereum.
Therefore, while signs point towards Ethereum’s market stabilization, monitoring the demand from US investors could provide insights into whether the bottom has truly been reached and if a recovery is on the horizon.
Furthermore, a cautious sentiment still prevails, evidenced by the negative market sentiment surrounding Ethereum.
Investors seem to be adopting a wait-and-see approach, likely anticipating Israel’s response to the recent events with Iran. At the current time, Ethereum is trading at $2.4K, marking an 8.4% decrease over the past week.