The recent green light for an Ethereum (ETH) ETF in the United States on May 23rd has sparked a surge of optimism among cryptocurrency options traders. While the impact on the ETH spot market has been limited, the approval has notably affected the implied volatility of call and put options, according to Aurelie Barthere, principal analyst at Nansen.
Barthere provided insights into the current dynamics of the Ethereum options market, stating that funding rates are currently neutral. However, the news about the ETH ETF has caused ETH call prices to rise in comparison to puts, resulting in a bullish sentiment among options traders. Barthere noted that ETH puts were the most expensive year-to-date, both in absolute terms and relative to calls, until March 28, 2024, indicating a bearish sentiment among traders. However, put option prices declined until May 16 and then partially recovered, possibly in anticipation of the ETF approval. In recent days, call options have been more expensive than puts, which was expected.
The Nansen analyst also suggested a mean reversion strategy for traders to protect themselves during periods of lower volatility. By examining the z-score of the difference between calls and puts, traders can identify opportunities for mean reversion.
Aside from the options market, the entire Ethereum ecosystem is undergoing significant changes. The approval of the ETF has reignited investor interest, leading to $33.5 million in inflows for ETH-pegged exchange-traded products in the past week. This trend has reversed a previous negative flow of funds. Furthermore, decentralized applications based on Ethereum have experienced a 21% increase in total value locked in the last 30 days, surpassing $116 billion and solidifying its dominance with a 70% share in the decentralized financial ecosystem, according to DefiLlama, a data aggregator.
It is important to note that the views expressed in this article are for informational purposes only and should not be considered financial or investment advice. Investing or trading cryptocurrencies carries a risk of financial loss.
In other news, there is speculation that an Ethereum ETF may begin operating in June, highlighting the possibility of this development becoming a reality. Additionally, Cathie Wood, the CEO of Ark Invest, has cited cryptocurrencies as a key issue in the US election, which could explain the sudden approval of Ethereum ETFs.
