Key Points
- Ethereum’s price seems to have stabilized despite negative market sentiment and Middle-East tensions.
- The unwinding of hedging flows and declining implied volatility suggest traders’ confidence in the stability of the Ethereum market.
Ethereum’s price appears to have found some stability after recent market volatility caused by geopolitical tensions in the Middle East.
Crypto trader Jake Ostrovskis from Wintermute has noted that options market data points to a potential local bottom for Ethereum. Ostrovskis observed a significant hedging flow in shorter-dated Ethereum contracts since the start of October, which is now unwinding as the market appears to firm up.
Is Ethereum’s Local Bottom In?
The recent increase in hedging flow in short-dated Ethereum contracts indicates that traders have been protecting themselves against price fluctuations, particularly in light of escalating tensions between Israel and Iran.
However, the noticeable unwinding of these hedging flows and the declining implied volatility for short-term options suggest that traders are growing more confident in the stability of the Ethereum market. In other words, Ethereum’s local bottom could be close, particularly as Israel has not yet retaliated against Iran’s recent attacks.
Another indicator that Ethereum may have hit bottom is the rise in long liquidations. Over $50 million worth of Ethereum long positions were liquidated during the recent price drop. Historically, a spike in Ethereum long liquidations has often coincided with local bottoms. This pattern was observed in March, July, and August.
US Investor Demand and Market Sentiment
Despite these signs of potential stability in the Ethereum market, there is currently no significant demand from US investors, as evidenced by a negative reading on the Coinbase Premium Index. Increases in the Coinbase Premium Index often correlate with a strong Ethereum recovery.
Furthermore, Ethereum’s negative market sentiment suggests that investors are remaining cautious. Many are likely waiting to see how Israel responds to Iran’s recent actions. At the time of writing, Ethereum was trading at $2.4K, down 8.4% over the past seven trading days.
