Ethereum price dips below the $1.8K support as bears prepare for Friday’s $1B options expiry


Ether (ETH) performance over the past three months has been less than satisfactory for holders and the altcoin tested the $1,800 support for the first time since July 2021 due to a 50% correction since April 3.

Ether/USD 1-day chart on Kraken. Source: TradingView

Due to volatility in stocks, investors were seeking shelter in the US dollar and on May 13 the DXY index hit its highest level in 20 years. The DXY measures the USD against a basket of major foreign currencies, including the British pound (GBP), the euro (EUR) and the Japanese yen (JPY).


In addition, the 5-year US Treasury yield hit its highest level since August 2018, trading at 3.10% on May 9, signaling that investors are seeking larger returns to offset inflation. In short, the macroeconomic data reflects the risk-averse sentiment of investors and this partly explains the bearishness of Ether.

Also among ether traders there was a 7-block chain reorganization on Ethereum’s Beacon Chain on 25 May. A valid transaction sequence was kicked off the chain as a competing block received more support from network participants. Fortunately, this situation is not uncommon and may have originated from miners with high resources or bugs.

According to data from Coinglass, the main victims of Ether’s 11% price correction were leveraged traders (longs), who saw $160 million in total liquidations on derivatives exchanges.

Bulls place their bets on $2,100 and above

Open interest for Ether’s May monthly options expiry is $1.04 billion, but the actual figure would be much lower as the bulls were overly optimistic. These traders could be fooled by the short-term pump to $2,950 on May 4th as their bets exceed $3,000 for the option expiration on May 27th.

A drop below $1,800 took the bulls by surprise as virtually no call (buy) option has been placed below that price level for May 27.

Total open interest for Ether Options 27 May. Source: CoinGlass

The 0.94 call-to-put ratio reflects a modest dominance of the $540 million put (Sell) open interest against the $540 million call (Buy) options. Still, any bullish bet could turn out to be worthless as Ether nears $1,800.

If the price of Ether remains below $1,800 on May 27 at 8:00 AM UTC, none of the $505 million call options will be available. This difference occurs because the right to buy Ether at $1,800 or more is void if Ether trades at expiration below that level.

Bear targets $325 million profit

Below are the three most likely scenarios based on current price action. The number of options contracts available on May 27 for call (bull) and put (bear) instruments varies depending on the expiration price. The imbalance in favor of each of the parties constitutes the theoretical advantage:

  • Between $1,600 and $1,700: 0 call vs 230,000 put. The net result supports $370 million to PUT (Bear) instruments.
  • Between $1,700 and $1,800: 50 calls vs 192,300 puts. The net result favors the bears at $325 million.
  • Between $1,800 and $2,000: 3,300 call vs 150,000 put. The net result is $280 million in favor of put (bear) equipment.

This crude estimate considers put options used in bearish bets, and especially call options in neutral-to-bullish trades. Still, this over-simplification disregards more complex investment strategies.

For example, a trader could sell a put option, effectively gaining positive exposure for Ether above a specific price, but unfortunately, there is no easy way to estimate this effect.

The Bulls Should Throw In The Towel And Pay Attention To The End Of June

Ether bears need to maintain the price below $1,800 on May 27 to secure a profit of $325 million. On the other hand, a push above $1,800 is required for a bull run to minimize losses at $45 million in the best case scenario.

A $160 million leveraged long position near Ether bulls had expired on May 26, so they should have less margin to push the price higher. Simultaneously, the bears will undoubtedly try to push Ether below $1,800 before the option expires on May 27.

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