Markets dropped after Ethereum options expired. Many traders are punished for being overly optimistic.
On August 27 at 8:00 UTC, the options for ETH expired. Ethereum’s price at this point was $3128.78. This price value rendered most options useless for both bears and bulls. According to Bybt.com, a total of $820 million of monthly options contracts were sold with a predominance of call options. The call/put ratio was 1.13.
Some bulls anticipated that the price of ETH would rise very strongly after the London hardfork happened on 4 August. Therefore, the amount of put options with a strike price of $3800 to $8000 turned out to be significant, $140 million. They all are useless, traders simply lost money by buying these contracts. But the bears are also among the losers, 83% of their contracts had the level of $2900 and below. Almost half of the call options had a strike price of $3,500 or higher. They also did not benefit traders.
Negative sentiment appeared in the Ethereum community. The reason is the overestimation of the consequences of the London hardfork. This was an important milestone on the road to Ethereum 2.0. The fee policy has changed significantly. Some of the fees are now burned. This stabilizes the price of ETH, making the platform more attractive to launch NFT and DeFi projects. Immediately after the successful hardfork, the price of ETH increased by almost 10%, from $2,475 to $2,700. The bullish trend continued throughout August, some optimistic analysts admitted even growth above $3500 by September. Some traders were also hoping for such an explosive rise. But there is still a long way to go to ETH 2.0, and traders did not take this into account.
Ethereum is still experiencing problems due to network congestion, so many decentralized finance (DeFi) and non-fungible tokens (NFT) projects are leaving for other platforms. These platforms are rushing to take advantage of Ethereum’s temporary difficulties to attract developers and get profit from popular products. Along with the well-known Binance Smart Chain and TRON, Ethereum now competes with Cardano (ADA), Solana (SOL) and others.
Cardano (ADA) will provide an opportunity to launch smart contracts after the Alonzo update set for September 12th. Over the quarter, the Cardano token has already doubled and took third place in terms of capitalization, displacing Binance Coin (BNB). ADA may continue to rise till Alonzo is carried out. Institutionals have invested about $6.4 million in ADA over the past week, according to a report from CoinShares. And Solana (SOL) has seen the largest daily gain for several days. According to CoinShares, Solana has become the leader in investments from institutionals for the week; they have flowed over $7.1 million into SOL.
Ethereum continues to be the leading altcoin and the most popular smart contract platform. But it already has strong competitors, and traders have to take this into account.