coindesk.com
Ether puts expiring in 30 and 60 days traded at a premium to calls a day after the cryptocurrency's price broke above $4,000.
The relative richness of puts likely stems from concerns that the U.S. SEC may not approve the highly anticipated ether spot ETF by May.
Ether ($ETH) options traders are bracing for near-term price weakness a day after the cryptocurrency convincingly rose past $4,000 to the highest since late 2021.
Ether's one-month call-put skew, an options market measure of sentiment, has turned negative, hinting at the relative richness of puts, or options used to protect against bearish price trends. The 60-day guage has also flipped in favor of put options, while the 90-day and 180-day metrics remain positive.
A put option gives the purchaser the right, but not the obligation, to sell the underlying asset at a predetermined price at a later date. A put buyer is implicitly bearish on the market, often looking to protect spot market holdings from potential price slides. A call option offers protection against bullish moves.
Investor interest in near-term ether puts likely stems from the dwindling probability of the U.S. Securities and Exchange Commission (SEC) approving a spot ether exchange-traded fund (ETF) by May, QCP Capital explained in its latest market insights post.
The 75% year-to-date gain in ether, the token of the Ethereum blockchain, has been catalyzed mainly by hopes the SEC will greenlight a spot ETF, opening the doors for traditional financial institutions to take exposure to the second-largest cryptocurrency without owning it directly. The SEC approved nearly a dozen spot bitcoin ETFs in January. Since then, billions of dollars have been poured into these ETFs, sending bitcoin to record highs above $70,000.
On Monday, ETF analysts at Bloomberg reduced their estimates for a spot ether ETF approval in May to 30% from 70%. The probability has dropped from over 70% in January to 31% on decentralized betting platform Polymarket. Earlier this year, investment banking giant JPMorgan said that the probability of the SEC approving an $ETH ETF by May is no more than 50%.
Last week, the regulator delayed its decision on BlackRock and Fidelity's applications for spot $ETH ETFs. Still, some observers are hopeful that BlackRock's ETF will win approval on May 23, when the final decision on VanEck's $ETH ETF application is due.