Ethereum bulls and bears battle it out this week as $2.8 billion in ETH options expire

Ether (ETH) is trying to hold above the $2,600 resistance level after rising 15.1% between September 18 and September 23. Recent macroeconomic data showing a weakening economy has fueled the rally in stocks, increasing demand for short-dated Treasuries. In this context, traders are betting that the upcoming $2.78 billion monthly Ether options expiry on September 27 will solidify the current bullish momentum.

Why Ether Price Is Improving

The surge in Ether prices was largely driven by the U.S. Federal Reserve’s rate cut, signaling a shift toward more accommodative monetary policy. As a result, the S&P 500 hit a record high on September 24. Further supporting this outlook was the decline in the S&P Global Manufacturing PMI on September 23, which heightened investor concerns about the health of the economy.

The yield on the U.S. 2-year Treasury note fell to its lowest level in 24 months as investors sought the relative safety of government-backed assets. The market’s current fears of an impending recession have benefited cryptocurrencies like ether, which investors view as scarce assets.

But in a broader sense, Ether is down 33% over the past four months, a decline that was largely driven by a U.S.-based spot exchange-traded fund (ETF) that ultimately delivered disappointing results, according to data from Farside Investors.

The $2.77 billion in open interest in options includes $1.82 billion in call (buy) options and $950 million in put (sell) options. While the bulls appear to have the upper hand, there are $1.47 billion in call options targeting prices above $2,700, but if ETH stays below that level by September 27, these positions will be worthless. As a result, even with a smaller number of put options, the bears still have a chance to tip the balance in their favor.

As the price of Ether has risen, so has the demand for smart contract processing capabilities. The number of transactions on the Ethereum network has increased by 15% in the seven days to September 24, driving the average transaction fee up to over $4.50 from $1.45 ten days earlier.

Additionally, the increase in Ether issuance has contributed to the asset’s efforts to reclaim the $3,000 level. According to Ultrasound Money, a total of 58,856.4 ETH has been added to the supply over the past 30 days, which represents an annual inflation rate of 0.6%. These factors have led investors to express concerns that Ether’s upside potential could be limited, especially due to competition from platforms like Solana and BNB Chain, both of which offer transaction fees that are more than 20x lower.

The bears are well positioned for the $2.8 billion monthly options expiration.

In this environment, traders believe that Ethereum needs to be bullish at the upcoming options expiry for the price to have a chance of rallying back towards $3,000.

Ether options open interest volume, USD, September 27. Source: Laevitas.chBelow are the four most likely scenarios based on the current Ether price trend, along with the potential impact of call and put options on the September 27 expiration. These estimates assume that put options represent a bearish position, while call options are consistent with a neutral-bullish strategy. However, it is important to note that this is a simplification and does not take into account more complex investment approaches.

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• Between $2,400 and $2,500: The result is $225 million in favor of put (sold) options.
• Between $2,500 and $2,600: The result is $100 million in favor of put options.
• Between $2,600 and $2,700: The balance shifts, with call (buy) options gaining about $70 million.
• Between $2,700 and $2,800: A favorable call option scenario, with a net profit of $220 million.

Essentially, the best chance for Ether bulls to gain a meaningful advantage is to push prices above $2,700 on September 27. However, the path for put options to gain a $100 million advantage is now looking clearer as the $2,600 support level continues to be tested.