Ether (ETH) has demonstrated resilience, maintaining a price point above $2,800, even amidst increasing bearish sentiment among options traders. This divergence between price action and options positioning raises the question: Are the bears wrong about Ethereum's near-term trajectory?
Several factors contribute to this intriguing dynamic. Firstly, traders appear to be employing bearish ETH options as a hedging strategy following Ether's impressive 49% rally in May. This suggests that while some anticipate potential downside, they are primarily seeking to protect profits rather than aggressively betting against the cryptocurrency.
Examining the derivatives market provides further insights. Open interest in ETH options has surged from $6.3 billion to $8.3 billion between early April and June 9, signaling stronger institutional involvement. Deribit remains the dominant exchange, holding a significant 72% market share. Analysis of the flow imbalance between bearish and neutral-to-bullish trades reveals the popularity of specific strategies.
One prominent strategy is the "short risk reversal," which profits from bearish price movements while collecting a net premium upfront. This involves buying a put option (the right to sell at a specific price) and selling a call option (the obligation to sell at a specific price if the option is exercised), hedging against losses below the put strike price. Another strategy gaining traction is the "bear diagonal spread," expressing a moderately bearish outlook over a specific timeframe.
However, Ethereum has faced rejection at the critical 200-day moving average near $2.6K, reflecting persistent selling pressure. The price remains trapped between the 100-day MA at $2K and the 200-day MA, forming a mid-term range. A break down from the rising wedge pattern would likely initiate a bearish continuation toward the $2.2K support area.
Despite the presence of bearish strategies, several indicators point to potential for further upside. Ethereum's price action mimics a previous breakout pattern that propelled ETH above $4,000 in December 2024. After rallying 50% in early May, ETH has been consolidating between $2,400 and $2,700, which may be a healthy pause before the next leg up. Strong on-chain support lies between $2,349 and $2,426, where approximately 2.56 million addresses hold 64.88 million ETH in unrealized gains. If this zone holds, it could help drive Ethereum's price higher. Additionally, Ether futures open interest has surged 40% in 30 days, reflecting growing trader confidence amid price consolidation, a pattern that tends to precede breakouts.
However, investors should also note Ethereum bearish signals. The ETH 1-month options 25% delta skew has risen to 7%. Historically, a skew above 6% is considered a strong Ethereum bearish signal, indicating that traders are increasingly expecting a potential downtrend, and are paying a premium for put options to hedge against price drops.
Ultimately, whether the bears are indeed "wrong" remains to be seen. The confluence of hedging strategies and technical indicators creates a complex landscape. Investors should closely monitor key support and resistance levels, as well as the evolving dynamics in the options market, to make informed decisions.
