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As the price of Ethereum fell to a 10-day low, traders began to buy put options on the asset to protect against a further drop in quotes. This was noticed by CoinDesk.
Open interest in put and call options on ETH by date. Data: CoinDesk.
According to Laevitas, on March 7, traders bought more than 36,000 derivatives contracts on the Deribit platform with an expiration date of March 18. Of these, more than 20,000 are blocked on the Paradigm institutional platform.
The par value of each contract is 1 ETH, the holders of put options will earn if the price of the cryptocurrency falls below $2200 by March 18. This type of derivative gives the buyer the right, not the obligation, to sell the underlying asset at a predetermined price on or before a specified date.
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Large traders who take a long position in the spot or futures market often use the instrument as a hedge against short-term price declines. Options are also used to speculate and profit from changes in the value of an asset as part of more complex trading strategies. Laevitas believes that the spike in put purchases on Monday was unrelated to the latest options.
“Most of these were direct trades, possibly short-term hedges,” the company said.
Ethereum has been in a downtrend since November and formed a $2,200 support level in January, CoinDesk analyst Omcar Godbowl noted. At the time of writing, the coin is trading around $2590 (CoinGecko).
Since the end of January, the Ethereum options market has shown a consistent bearish bias in put-to-call ratios across all timeframes, Godbowl added.
Specialists of the Kraken bitcoin exchange drew attention to another bearish signal for the cryptocurrency – an increase in the inflow of the asset to the exchanges, which may mean a resumption of sales.
In bitcoin, this trend looks less pronounced, experts added.
Recall that the price of Ethereum, like digital gold, set a maximum in November.
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