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Ethereum Derivatives Metrics Signal Modest Downside Tail Risk Ahead: Nansen
The crypto market has been unpredictable of late, with Ethereum (ETH) no exception. Despite a recent surge, the cryptocurrency’s derivatives metrics suggest that there is still risk for modest downside tail risks ahead.
As reported by Nansen, the options and futures exchange platform Deribit, Ethereum’s derivative market shows signs of potential pressure in the short term. According to data from February 25, Ethereum has seen a significant call-side positioning, indicating that traders are expecting higher prices.
However, this optimism may be misplaced, as traders have also heavily loaded up on puts, suggesting that there is still risk of a pullback. The put-call ratio, which measures the number of outstanding calls compared to puts, currently sits at 0.46. This indicates that while many investors expect ETH’s price to rise further, there are also those who anticipate a drop.
The numbers themselves tell an important story. According to Nansen, more than 1.278 contracts have been bought for calls and a mere 582,105 puts. It is crucial to note that any sharp change in market sentiment could result in significant losses for traders.
It’s worth noting that the Ethereum options market has revealed that many are anticipating higher prices for ETH. This may suggest that investors who hold long positions might be underexposed to potential risk, as this optimism could lead to a reversal and losses.
The 90-day implied volatility (IV) data from Nansen also offers insight into the situation. According to their analysis, this data indicates traders are not anticipating much price movement, which may not align with what actually happens. This might indicate that there is a growing risk of Ethereum falling in value, as any unexpected events could result in significant losses for those long.
The market intelligence platform has also indicated that, based on the derivatives metrics analyzed, it seems that there are signs of bearish trends emerging in the near term. Furthermore, they have noticed “dealer hedging” happening close to the $2,500 resistance level. This means traders are entering positions that will profit them if their primary investments turn into losses.
As a result, when prices hit this crucial level, it could trigger selling pressure and accelerate Ethereum’s decline.
Overall, while there may be potential for upward movement in ETH, these derivatives metrics suggest that there is also a risk of modest downside tail risks ahead.
Source: https://cryptopotato.com/ethereum-derivatives-metrics-signal-modest-downside-tail-risk-ahead-nansen/
