Ethereum open interest overtakes that of Bitcoin as derivative traders bet on the upcoming Merge.
The upcoming Ethereum Merge Scheduled for September 15 has started to cause subtle changes in the investment decisions of traders. The Merge will see the largest smart contract platform transition from its current proof-of-work(PoW) consensus mechanism to a more energy-efficient proof-of-stake(PoS) mechanism. With miners becoming validators in the new version of the second largest digital asset by market capitalization.
Ethereum Options Open Reaches New All-Time High
On-chain data shows that derivative traders are placing directional bets for Ethereum ahead of the merge. Hence for the first time, Ethereum options open interest(OI) reached a new all-time high of $8 billion, surpassing that of Bitcoin, currently at $4.8 Billion.
According to data aggregator platform Glassnode, while ETH Options OI has reached new ATH, Bitcoin continues to lag. The foremost digital asset’s option OI is still far below the top at just 35% from its ATH. However, interest in the upcoming merge seems to have impacted investor sentiments towards Ethereum, causing it to reach new highs while BTC remains relatively stable.
Ethereum Average Gas Price. Source: Ycharts
The Ethereum option is a metric that measures the quantity of active Ethereum derivative contracts. The current surge to a new ATH follows the success of the blockchain’s final public testnet merge termed Goerli. Its success led to gas fees on the network plummeting to their lowest levels in more than a year, as seen above.
Source: Glassnode
Furthermore, Ethereum traders’ direction is even more apparent when looking at September contracts on Deribit. Regarding size, call options are far more significant than put options. Traders are banking on ETH prices to rise over $2.2k, with substantial open interest reaching $5,000.
However, futures and options figures suggest that cryptocurrency traders are preparing for another decline in the price of ETH following the Merge. This, according to Glassnode analysts, is a sell-the-news type of situation. Nonetheless, Ethereum’s Co-founder Vitalik Buterin believes the merge has not been priced in yet and will not be until its completion.
Ethereum’s Merge Renews Market Optimism
The upcoming Ethereum merge has catalyzed renewed interest in the digital assets space. The market, which has been in a downturn since the year began, turned for the worse this summer. However, the merge has seen the space recover with Bitcoin and altcoins rallying.
30-day price chart for ETH. Source: CoinGecko
Ethereum has had a fantastic few weeks, increasing more than 60% in the previous month. However, the digital asset is still down more than 60% from its record high in November 2021. As seen above, it has surged over 18% in the last 7-days to reach a price of $2,000 at press time.
Consequently, other altcoins have followed suit, causing market sentiments to improve significantly. Accordingly, the fear and greed index reads 47, which is neutral. This is the highest value recorded since April.
Do you think the upcoming merge can catalyze a bull run? Let us know your thoughts in the comments below.
Chris is a crypto enthusiast and a firm believer in the blockchain’s ability to create a new financial paradigm. Through writing, Chris hopes to expose the intricacies of this disruptive technology and how it is beneficial to Africans and developing countries. He aims to give readers a rational and unbiased outlook of the industry by equipping them with the necessary information to make enlightened investment decisions.
