May-June passed the crypto room in no time and the 2nd quarter of 2021 is drawing to a close. However, one important event remains for Ethereum that could fundamentally change the course of its price action well into the third quarter. Within the next 24 hours, Ethereum options will go through their second quarterly expiry and options worth over $ 1.5 billion in open interest will be executed.
A week ago, the price position had a higher likelihood of a bullish reversal for the asset, but given its value at the time of publication, the option expiration could again confirm the bearish market. Here’s why –
June 25th – The clock is ticking against Ethereum?
In a previous article we had indicated that nearly 650K ETH would expire on June 25th. At the time of going to press, global open interest had increased, as shown in the graphic below.
As of press time, Skew said there were 685,000 ETH in the next 24 hours on the way to expiration valued at nearly $ 1.35 billion (the value had declined since June 17 due to the drop in prices). The pretext remains the same, however. In a previous article we mentioned that the expiry can act as a bullish catalyst if Ethereum’s price action can solidify its position above USD 2,200 on or before the expiry.
There are currently around 101,000 call options in play at that particular price and these are becoming worthless.
With more than 80,000 put options at exercise prices below $ 2,100, it is possible that the downward pressure will be extended after the term has expired. As mentioned in the above article, the 2nd quarter expiry is 30% greater than the 1st expiry. And the first option execution resulted in a 60% rally for Ethereum.
In terms of implied volatility, too, the chances of a bullish recovery are bleak. The graph above highlights the fact that rising implied vol was a key factor in causing the price to break higher during the first quarter. At the moment, Realized Volatility is implicitly leading the charts, suggesting that traders are not expecting sharp price movements anytime soon.
At the time of going to press, implied volatility had hit a low, last seen in early May.
Yes, both Ethereum and Bitcoin have rallied relatively well after the decline, but here’s the reality – a position needs to be defined above $ 36,000 with a daily candle being close to considering the idea of a bullish range while for Ethereum the threshold remains above $ 2,500.
The expiry can hurt the bullish fall in Ether. It is therefore plausible that the expiry of the 2nd quarterly option could inevitably initiate a strong bearish cycle.
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