Ethereum Options Hit Hard With Unprecedented Grayscale Rally

  • Grayscale-led crypto-wide rally is becoming a serious threat for investors holding Ethereum sell options. 
  • With a potential Bitcoin Spot ETF approval back on the table, option sellers’ positions are at risk of liquidation, and traders could be forced to close. 
  • As Ethereum inches towards strike prices, traders find themselves at a crossroads. 

August has shaped up to be a challenging month for the crypto market, delivering heavy blows to major assets and spreading chaos. Capitalizing on this turmoil, many traders opened short positions across Bitcoin and Ethereum options in hopes of continued momentum into the depths. 

Yet, in an unexpected twist, the crypto market caught unsuspecting investors off guard by flipping the prevailing bearish outlook. The instant transformation came at the heels of Grayscale’s landmark victory over the SEC, which injected a new layer of conflict into the mix. 

Now, as the market turns green, traders in short positions find themselves at a crossroads, worried about potential liquidation. With both Bitcoin and Ethereum showing strength, the pressing question looms: Are short positions at risk, or will they ride out without getting liquidated? 

Are Ethereum Options Safe?

The US Court of Appeals’ ruling in favor of Grayscale has sparked hopes of a potential Bitcoin Spot ETF approval, triggering an aggressive uptrend and hitting options sellers right where it hurts. 

According to crypto insights from Blofin Company, the unprecedented rally is becoming a serious threat for investors holding Ethereum options as the asset pumps towards liquidation prices. An analysis of block trading records revealed that most option strike prices are concentrated between $1850 and $1900. Should Ethereum maintain its momentum, many options sellers stand at risk of substantial losses.

Ethereum Call Options by Strike Price. Source: Blofin Company.

Making matters worse, Blofin Company revealed that many of these investors hold naked positions, which could potentially lead to unlimited losses since they would need to buy the asset at higher market prices to fulfill their call options. 

With a potential Bitcoin ETF approval looming on the horizon, options sellers now have no option but to close their positions as Ethereum gathers momentum for another pump. 

At press time, Ethereum exchanged hands at $1700 with a daily trading volume exceeding $5.6 billion. The token would have to pump another 8 to 11% to hit the array of call options flocked at $1900. 

On the Flipside

Why This Matters

This series of events serves as a stark reminder of the importance of risk management when trading highly volatile and speculative markets such as crypto. Earlier this week, the market was in a persistent downtrend, indicating a move toward the previous year’s lows. However, owing to the speculative nature of the industry and its sensitivity to news, the prevailing bearish sentiment has undergone a swift reversal, sparking hopes of a rally to pre-August highs. It’s important to tread carefully when trading something as unpredictable as the crypto market. 

Read why Charles Hoksinson thinks Cardano could surpass Ethereum: 

Hoskinson: Cardano Will Outshine Bitcoin and Ethereum

Catch up on some Cardano price action: 

Cardano Bulls Charge Toward $0.27: Fakeout or Breakout?

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