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The Defiant

08/02/2022

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The Merge Drives Value of ETH Options Past Bitcoin

Sophisticated Investors Pile into Options Ahead of Ethereum's Shift to PoS

The Merge Drives Value of ETH Options Past Bitcoin

If investors needed any more evidence The Merge is driving a rally in Ethereum here’s one more compelling datapoint: Open interest on ETH options just leapfrogged Bitcoin. 

On July 28, the total amount of put and call contracts on ETH surpassed BTC for the first time, according to data provider Glassnode.

Source: Glassnode

Open interest is the notional value of the puts and calls of a given asset that haven’t been settled yet. Puts are usually a bet a security will decline in value, and calls a wager the value will increase. The put/call ratio on ETH options is 0.26, according to the trader who goes by Chang, a partner of the Derebit options platform. This indicates a heavy weighting toward people looking to go long on Ethereum’s token. 

With developers expecting Ethereum to merge its Proof-of-Work and Proof-of-Stake blockchains on Sept. 19, ETH has soared more than 47% in the last 30 days, according to CoinGecko. The Merge marks the most significant overhaul of Ethereum. The switch is expected to dramatically reduce gas fees and improve efficiency for the leading system of smart contracts and dApps.

Most of the options expire after The Merge, according to Chang on Twitter. This further indicates that derivative traders are betting on the upgrade as a major upward driver on ETH’s price. 

The ETH/BTC ratio has also shot up from a year-to-date low of 0.052 on June 16, to .069 on Aug. 1, according to a Trading View chart

No doubt ETH supporters, as well as options traders, will be watching the ratio closely as the Merge is p next month.

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