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Ethereum Options Hits a High Record. Why Does The Demand Keep Increasing?

Ethereum Options Hits a High Record. Why Does The Demand Keep Increasing?

As demand for ETH rose in recent weeks, the value of the Ethereum options market reached a record high. This follows the high-profile announcement of the issuance of Eth2, which was formalized after deposits met their threshold at the Eth2 contract address.

Analysts at Deribit, the biggest cryptocurrency options market, said: “Our Open Interest ETH Option is a new $826 million ATH! With over 669k ETH OI, the Christmas day expiry leads. 

For this strike, the ETH Put/Call Ratio: 1.19 ETH Maximum Pain is $400 for the expiry of December 25th!”

As a consequence, Ethereum could see increased volatility approaching December 25 as the expiry of major options approaches.

eth analysis

The Fundamentals have been Enhancing for Ethereum.

The overall increase in Ethereum's trading activity was reflected by its improving fundamentals. For example, IntoTheBlock (ITB), an on-chain analysis firm, reported that the Ethereum network's hash rate has remained at all-time highs. 

This is indicative of the increasing demand for ETH, as it demonstrates that miners continue to aggressively allocate their resources to mining ETH. 

In the short term, mining on the Ethereum blockchain network will continue despite the release of Eth2.  The increasing hash rate would remain a positive metric for ETH as long as mining on Ethereum coexists.

ethereum analysis
The Ethereum blockchain network's hash rate (source: intotheblock)

The upgrade to the Eth2 network moves Ethereum from the algorithm of proof-of-work (PoW) consensus to the algorithm of proof-of-stake (PoS), which eliminates mining. But the PoW chain will coexist with the Beacon Chain in the foreseeable future. 

The analysts at Intotheblock stated:

    “While the launch of the Beacon Chain marks the beginning of the end for  #Ethereum miners, the hash rate of the network has remained close to its all-time highs. Even though the genesis of the Beacon Chain went life, the evidence of the work chain will also continue to operate in parallel.”

What’s Next?

Analysts have emphasized the growing interest in the Ethereum ecosystem through different subsectors. Mythos Capital co-founder Ryan Sean Adams, for example, reported that 1% of all ETh supplies are now locked in ETH bonds.

Adams noted that this shows that many people are seeking exposure to the economy of Ethereum, which indicates that ETH is considered by individuals to be money. He said:

"There is already 1% of all ETH supplies locked in ETH bonds. Not a week after the launch. There is a clear demand for non-sovereign internet bonds. People want to be exposed to the economy of Ethereum. And the bonds are denominated in money. It's because ETH is money."
Analysts say the long-term growth outlook of Ethereum remains optimistic with trading activity on the rise, Eth2 offering additional scalability, and the market for ETH as money increases noticeably.

The data from the market for Ethereum options also clarifies the tremendous uncertainty that ETH has seen to date. There are increasing calls from traders expecting an increase in Ethereum's volatility, especially as it comes from a crucial upgrade of the network.

For investors, what Ethereum 2.0 could mean

Because the final stage of the process is scheduled to be completed in 2023, the market will have to wait and see what kind of real effect the ongoing Ethereum upgrade might have on its native currency. 

But a major fundamental upgrade to the ether-supporting network could lead to its price moving on its fundamentals rather than merely following the price of bitcoin.

According to the Messari article, "The heart of ETH 2.0, which makes the whole system possible, is ether," "ETH will not only be Ethereum's native store of value assets and fuel for transactions but will also be Ethereum's ultimate source of security because of its role in the [proof-of-stake] system."

Thus while Bitcoin can be seen as being between a value store and a goods in the triangle of assets, it could become finally the first asset to be combined by all three classes of assets: capital assets, commodities and value stores. 

"When the price of ether starts to be driven by its catalysts, holding it as a proxy for BTC exposure will not work as expected." said Balakrishnan.

Weakening of Bitcoin-Ethereum correlation

Some experts say that with more institutions spending money on Bitcoin and increasing its price and decoupling ether and other cryptocurrencies from Bitcoin gradually.

In fact, as bitcoin recorded a record high cost this week, Ether isn't even close to its $1,448.18 all-time high. 

CoinDesk data shows that though still strong, the 90 day coefficient of correlation has gradually weakened since summer from 0.93 to almost0.7 in early December, among the prices of the two leading cryptocurrencies. 

Ashwath Balakrishnan, a researcher at digital asset research firm Delphi Digital, told CoinDesk that The thing about correlation is that it can disappear at any moment." 

"You want to understand the core fundamentals of that because now you are exposed to something very different if you consider Ether a proxy [to] your Bitcoin exposition and when] prices decouple."
Bitcoin is a safeguard against a drop in the purchasing power of US dollars used by many investors this year. Ether is considered the "global computer" currency which aims at building a decentralized application ecosystem.

The close historical link between cryptocurrencies and bitcoin maybe because of the small number of digital asset ecosystems related to the global economy. 

Crypto assets' total market capitalization is estimated at 562 billion dollars, a mere 1.7 percent of the combined market limit of S&P 500 of 32.2 trillion dollars. 

With practically every crypto asset based on various fundamentals, non-bitcoin cryptocurrencies can trend with bitcoin prices simply because the emerging market remains small and island.

Yulina Firmansyah
Yulina Firmansyah Hi, I am a wife who really loves crypto and blockchain technology, I am a writer for this blog.

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