Options market data indicated that ETH price may stabilize. However, market sentiment remained negative amid rising tensions in the Middle East.
The price of Ethereum (ETH) appeared to be stabilizing after recent volatility due to geopolitical escalation in the Middle East that spooked the crypto market.
Jake Ostrovskis, a crypto trader at Wintermute, said options market data suggested the biggest altcoins could hit a domestic low. He pointed out:
“Since Tuesday (October 1), we have observed the largest hedging flows in #ETH for short-term contracts. And these flows are now unwinding as the market looks solid.”
Source: Signal Plus
Is ETH hitting rock bottom locally?
For context, an increase in hedging flows for short-term ETH contracts over the past few days meant that traders took hedging positions to protect against price fluctuations, especially amid rising tensions between Israel and Iran.
They used short-term options to accomplish this.
However, there was a noticeable unwinding of hedge flows over the weekend, reducing the implied volatility of these short-term options.
This suggested that traders were starting to have confidence in the stability of the ETH market and that hedging was not necessary.
In other words, ETH’s domestic lows could fall soon, especially since Israel has not retaliated against the recent Iranian attack.
Source: CryptoQuant
Another set of data that suggested ETH may have reached a bottom was the increase in long-term liquidations. The recent selloff led to the liquidation of $50 million worth of ETH long positions.
In most past trends, spikes in ETH long liquidations coincided with local bottoms. This pattern was seen in March, July, and August.
That said, there hasn’t been much demand from US investors, as evidenced by the negative numbers in the Coinbase Premium Index. Rising Coinbase Premium Index often correlates with significant recoveries in ETH.
Source: CryptoQuant
Therefore, despite the potential stability in the ETH market, tracking US investor demand could indicate whether a bottom has been reached and whether it will be followed by a reassuring recovery.
Additionally, a cautious outlook remained evident as indicated by the negative market sentiment for ETH.
Source: Santiment
This underscored that investors are on the sidelines, perhaps waiting for Israel’s response to last week’s Iranian move. At the time of writing, ETH is trading at $2.4 million, down 8.4% over the past seven trading days.
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