• Ethereum’s price has been highly volatile following the approval of spot Ethereum ETFs in the US, leading to a 4% decline just before the expiration of 350,000 ETH options with a Max Pain point of $3,200.
  • Analysts observe potential sell-off or profit-taking activities, while long-term investors may see the recent correction as a buy-the-dip opportunity.

Ethereum’s price trajectory has been a rollercoaster recently, especially with the approval of spot Ethereum ETFs in the US on May 23. This event seemed like a classic buy-the-rumor, sell-the-news scenario, with Ethereum experiencing a sharp 4% decline shortly after the announcement. Today, May 24, approximately 350,000 ETH options are set to expire, marking a significant event for the cryptocurrency market.

Understanding the Max Pain Point

These soon-to-expire ETH options have a Max Pain price of $3,200 and a Put Call Ratio of 0.58, with a staggering notional value of $1.3 billion. The Max Pain point signifies the price level at which option holders would experience the maximum financial loss. As Ethereum hovers around $3,700, this $3,200 mark is a critical level to watch.

Leading up to this expiration, Ethereum has witnessed significant volatility. Speculation around the spot ETH ETF approval drove Ether above $3,000, even nearing $4,000 at one point. However, the rally was short-lived, with the price now seeing a 4% pullback. Despite this, Ethereum has shown strong performance in recent weeks, often outpacing Bitcoin.

The bullish sentiment was largely driven by advancements in ETF developments, resulting in a dramatic 20% surge in Ethereum’s price within a single day. During this period, Ethereum’s short-term option Implied Volatility (IV) reached 150%, significantly higher than Bitcoin’s, raising traders’ expectations for price movement.

Potential for Sell-Off or Profit-Taking Activities

The market’s current volatility and the high IV levels suggest an unpredictable landscape. Traders might consider calendar spreads to manage risk and capitalize on volatility without relying solely on sustained high IV levels. Calendar spreads typically involve buying and selling options with different expiration dates, providing a strategy to navigate the turbulent market.

The approval and launch of the Ethereum ETF had a notable impact, leading to increased volatility and over $132 million in long liquidations. This event underscores the risks and rapid changes in market sentiment during high-profile developments.

Crypto analyst Ali Martinez has observed increasing Ethereum deposits into digital asset exchange wallets, indicating potential sell-off or profit-taking activities as the 350,000 options expire. Additionally, the Tom DeMark (TD) Sequential indicator has flashed a sell signal on Ethereum’s daily chart, suggesting increased sell pressure. This could lead to a price retracement before the uptrend resumes.

Despite these bearish signals, the recent price correction might present a buy-the-dip opportunity for long-term investors. Historically, such corrections have been seen as entry points by those with a long-term perspective on Ethereum’s potential.

While the US SEC has approved 19b-4 filings for an Ethereum ETF, the S1 registration is still pending, expected to take a few more weeks. The funds are awaiting official listings before a notable inflow is recorded, which may trigger a rally.