- Data from the options market indicated that the ETH price could have stabilized.
- However, market sentiment was still negative amid tensions in the Middle East.
Ethereums [ETH] the price appeared to stabilize after recent volatility following geopolitical escalations in the Middle East that spooked the crypto markets.
According to Jake Ostrovskis, a crypto trader at Wintermute, the options market data suggested that a local bottom could emerge for the largest altcoin. He noted,
“As of Tuesday, October 1, the largest hedging flows observed in #ETH were in shorter-term contracts, and these flows are now declining as the market looks firmer.”
Source: SignalPlus
Has ETH’s local bottom been reached?
For context, the surge in hedging flows in short-term ETH contracts in recent days meant traders were taking hedging positions to protect against price swings, especially amid the escalations between Israel and Iran.
To achieve this, they used short-term options.
However, there was a notable decline in hedging flows and declining implied volatility for these short-term options over the weekend.
This suggested that traders were gaining confidence in the stability of the ETH market and that hedging was not necessary.
Put another way, ETH’s local bottom could soon be in, especially since Israel has not retaliated against the recent attack on Iran.
Source: CryptoQuant
Another data set that suggested ETH may have bottomed was the rise in long-term liquidations. The recent plunge has liquidated over $50 million worth of ETH long positions.
In most past trends, a spike in long ETH liquidations coincided with local bottoms. This pattern was observed in March, July and August.
That said, there was no significant demand from US investors, as evidenced by a negative reading of the Coinbase Premium Index. More often than not, increases in the Coinbase Premium Index correlate with a strong ETH recovery.
Source: CryptoQuant
Ergo, despite the potential stability in the ETH market, monitoring demand from US investors could be an indication of whether the bottom has been reached and whether a relief recovery could follow.
Moreover, there was still a cautious outlook, as evidenced by ETH’s negative market sentiment.
Source: Santiment
This highlighted that investors were on the sidelines, likely waiting for Israel’s reactions to last week’s Iranian action. At the time of writing, ETH was trading at $2.4K, down 8.4% in the last seven trading days.
