Ether’s (ETH) performance over the past three months has been less than satisfying for holders and the 50% correction since April 3 caused the altcoin to test the $1,800 support for the first time since July 2021.
Ether/USD 1-day chart at Kraken. Source: TradingView
Due to the volatility in stocks, investors had been seeking shelter in the United States dollar and on May 13, the DXY index reached its highest level in 20 years. DXY measures the USD against a basket of major foreign currencies, including the British pound (GBP), the euro (EUR) and the Japanese yen (JPY).
Moreover, the five-year U.S. Treasury yield reached its highest level since August 2018, trading at 3.10% on May 9 and signaling that investors demand larger returns to compensate for inflation. In a nutshell, macroeconomic data reflects risk-averse sentiment from investors and this partially explains Ether’s downturn.
Further creating panic among Ether traders was a seven-block chain reorg on Ethereum’s Beacon Chain on May 25. A valid transaction sequence was knocked off the chain due to a competing block getting more support from network participants. Fortunately, this situation is not uncommon and it might have emerged from a miner with high resources or a bug.
The main victims of Ether’s 11% price correction were leverage traders (longs) who saw $160 million in aggregate liquidations at derivatives exchanges, according to data from Coinglass.
Bulls placed their bets at $2,100 and higher
The open interest for the Ether’s May monthly options expiry is $1.04 billion, but the actual figure will be much lower since bulls were overly-optimistic. These traders might have been fooled by the short-lived pump to $2,950 on May 4 because their bets for the May 27 options expiry extend beyond $3,000.
The drop below $1,800 took bulls by surprise because virtually none of the call (buy) options for May 27 have been placed below that price level.
Ether options aggregate open interest for May 27. Source: CoinGlass
The 0.94 call-to-put ratio shows the slight dominance of the $540 million put (sell) open interest against the $505 million call (buy) options….