Ethereum surged above $3k on Monday, sparking anticipation for further increases. It had to end the day above the mark to guarantee a buildup for an attempt at $3,200. However, the asset retraced and ended the day with slight losses.
The coin rebounded on Tuesday, peaking above $3k. It recent surge above the highlighted level was short-lived, like the previous day’s. ETH is trading at $2,960 due to the correction that followed the brief breakout.
While it prints a green candle on the 1-day chart, there are indications that the asset may plummet in the coming days. A recent outlook noted that the bollinger bands on the 4-hour chart suggest a further pullback is likely as the coin attempted to break the upper bands a few hours ago. Ethereum is currently grappling with selling pressure, which has worsened in the past hour.
Aside from the signals from the smaller timeframe, a key event will take place on Wednesday, which could trigger notable declines.
Ethereum Gears Up For Option Expiry
Recent data from Deribit reveals an impending option expiry. Contracts worth over $58 million will be terminated on Dec 31. On closer inspection, there is a total of 19,780 open interest, with the put buyers accounting for 10,075. The increase in bears on this contract may signal a significant decline for the asset.
However, the bulls make up for the numbers with volume. They hold notably higher volume, suggesting possible low volatility performance in the coming days.
Nonetheless, the Greek table suggests that market makers are currently bullish. ETH is trading at $2,965, and the options delta is currently negative. MMs will look to make delta neutral, which means they are hedging the asset: buying spots and longing in futures.
Delta will become neutral when the asset surges above $3,200. However, the likelihood of such a leap happening is reduced. A look at recent data from CryptoQuant indicates that traders are dumping more assets at the time of writing, pushing exchange reserves slightly higher over the last 24 hours.
Nonetheless, the current trend by traders does not eliminate the chances of a brief breakout above $3k as seen on Monday. With the bulls edging in volume, they may cause shortterm hike. It is worth noting that most of the positions will become worthless if expiry happens at the max pain point of $2,950.
To maximize profit, the bulls will look to push prices as high as possible. ETH may retest $3,100 as a result.
When the Hedge is Removed
The biggest fear at the time of writing is what happens after the expiration. The fears are even more valid considering that investors are still selling on the spot market. However, prices ae yet to react due to the cushioning effect from the upcoming options expiry.
When the expiry occurs, market makers may remove the current hedges, sending the altcoin downward. Ethereum may continue to decline until it retests $2,900. A decisive slip could send it tumbling to $2,800.
Nevertheless, there are other terminations for Jan 1. Currently worth $66 million, the bulls may restart the uptrend as the max pain point is at $2,975.
