ETH ETF performed poorly on its first day of listing. Will the price drop repeat history?
Original title: ETH ETFs Approved: Will History Repeat with a Price Drop?
Original author: Anand Raj, Deribit
Market View
The spot Ethereum ETF will start trading on Tuesday, but despite the approval, ETH prices have not risen significantly, and the put/call ratio indicates potential downside. Historically, new crypto listings usually lead to price corrections.
Put Butterfly Strategy
The recommended strategy is the Put Butterfly Strategy. The Butterfly Spread with Puts is a three-part strategy that involves buying one put option at a higher strike price, selling two put options at a lower strike price, and then buying one put option at a lower strike price.
If you are concerned about the decline in ETH prices, you can consider executing this strategy.
Trade Structure
(OTM Put) Buy 1x ETH-09AUG24-$3,400-P @ $144.5
(OTM Put) Sell 2x ETH-09AUG24-$3,300-P @ $105
(OTM Put) Buy 1x ETH-09AUG24-$3,200-P @ $75
Target: Spot Level = $3,300
Payment
Max Profit: $90.5/ETH
Strategy Debit: $9.5/ ETH
Why should we take this trade?
The spot Ethereum ETF has received final approval and will begin trading on Tuesday. According to Deribit data, the put/call ratio for the August 9 expiration has surged to 1.19.
This shows that the number of put options is higher than the call options, indicating that traders are expecting a possible immediate decline or are looking to hedge against price declines. Despite the approval news, the price of ETH has not risen significantly. Since May, the cryptocurrency market has been full of anticipation for the ETF approval. However, ETH's market capitalization has performed poorly compared to other cryptocurrencies, as shown in the figure below.
I have written a detailed insight on crypto product post-listing performance. Historically, regulated exchange products tend to correct after listing. This pattern was exemplified by the launch of CME Bitcoin futures in December 2017, the Coinbase IPO in April 2021, the futures-based Bitcoin ETF in October 2021, and the spot-based Bitcoin ETF in January 2024.
For more information, see the June 27 insight here .
From the technical chart of ETH, although the spot ETH ETF has been approved to start trading on Tuesday, the selling pressure on the underlying asset seems to have increased and the price has not risen significantly. I expect the price of ETH to fall to $3,300, exactly to the support point highlighted by the yellow line in the attached ETH chart.
Therefore, traders can consider deploying a bearish butterfly strategy to take advantage of the expected price movement.
To execute this method, traders can buy put options with a higher strike price (for example, $3,400), while selling double the number of put options at a lower strike price (for example, $3,300) and buying put options at an even lower strike price (for example, $3,200).
The trader will get the maximum profit from this strategy if the ETH price is $3,300 when the options expire on August 9.
If the market improves, the potential loss is limited to the initial $9.5.
How to make this trade on Deribit?
Step 1: Go to the COMBO book under the "Strategies" tab and create a COMBO.
Step 2: Click on "RFQ" and send your order to the COMBO list.
Step 3: Go to the COMBO list (ETH), click on your strategy and execute.
Original link
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Once the Federal Reserve starts the rate hike cycle, is "three consecutive hikes" a reasonable expectation?
BMO expects consecutive rate hikes in October and December, with a total of three increases potentially wiping out all rate cut gains for 2025. Vanguard believes "three consecutive hikes" is a reasonable starting point, but the actual number could be as high as six. There are historical exceptions: in 1997, the Federal Reserve raised rates only once and took no further action for the following 18 months. Meanwhile, trillion-dollar debt financing by AI giants, private credit exposure in the insurance industry, and the 10-year U.S. Treasury yield approaching 5% are the most dangerous pressure points in this rate hike cycle.
Goldman Sachs Also Changes Its Tune: The Fed Will Raise Interest Rates Next Week!
Goldman Sachs has shifted from predicting a rate hold to betting on a 25 basis point hike next week, stating that this change is not due to particularly bad inflation data—the August CPI was not perfect, but it wasn’t alarming either. The real key is that hawkish comments from Waller have already shaped market expectations: "If the inflation data isn’t perfect, there will be a rate hike." If the Federal Reserve backs down now, its credibility will suffer a serious blow and long-term interest rates could react sharply and immediately.
Meteora’s $20M fee surge fuels 18% rally – But MET’s next leg faces THIS hurdle
Crypto prices
More
