Options Dealers' Hedging Activities Push Ether Price Above $3,000

ether options PUSH 2024-02-22 86

According to CoinDesk, options dealers likely bought ETH in the spot/futures market to hedge their short bets in call options, adding to bullish momentum. A similar pattern played out in the bitcoin market in November, accelerating price gains above $36,000. Dealer hedging, a market dynamic that accelerated bitcoin's (BTC) uptrend in late 2023, is now influencing ether's (ETH) price. Ether, the native token of Ethereum’s blockchain, rose above $3,000 early Thursday.

The breakout above the psychological barrier was partly aided by the hedging activities of market makers or dealers from the ether options market, according to Griffin Ardern, head of options trading and research at crypto financial platform BloFin. As ether rallied close to the said level, dealers bought ether in the spot/futures market to hedge upside risks and keep their overall market exposure direction neutral. The hedging activity added to the bullish momentum, lifting ether past $3,000.

"A large amount of negative dealers' gamma is concentrated around $3,000, so market makers need to hedge the risk here. Negative gamma means that the market maker sold many calls at the $3k strike," Ardern told CoinDesk. "To deal with this, market makers must trade in the direction of the price move – buy ether as prices rise." "The hedging program took effect at around 6:48 a.m. UTC early today," Ardern added. Ether topped $3,000 at around 08:55 UTC, rising to a high of $3032 by 09:50 UTC, data from charting platform TradingView show.