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Ethereum

Is Ethereum Set to Rally After Shanghai? Data Suggests Bullish Sentiment

Reynaldo Marquez by Reynaldo Marquez
2 months ago
in Ethereum
Reading Time: 2 mins read

Over today’s trading session, Ethereum and the crypto market are showing strength and are trading in the green. The positive price action could be supported by the expectation around ETH’s upcoming major upgrade, “Shanghai.”

Related Reading: Analyst That Predicted 2022 Crypto Bottom Says Ethereum Will Hit $10,000

Scheduled for April 12th, this upgrade will allow Ethereum 2.0 validators to un-staked their locked ETH. As a result, the cryptocurrency’s available supply is bound to increase, which could translate into negative price action.

So far, the opposite is taking place as traders remain optimistic. As of this writing, Ethereum (ETH) trades at around $1,900 with a 3% and 5% profit over the last 24 hours and the previous week, respectively.

Ethereum ETH ETHUSDT
ETH’s price is moving sideways on the daily chart. Source: ETHUSDT Tradingview

To Sell Or Not To Sell, Ethereum Investors In A Dilemma

According to crypto analysis firm Blofin, the ETH supply locked on the “Beacon Chain,” the Proof-of-Stake (PoS) blockchain that supported the transition into this consensus algorithm, is trading at a loss. Thus, investors have little incentive to sell their ETH even after “Shanghai.”

It is more likely that these investors will wait for ETH to reclaim previously lost territory, which could support its bullish price action and extend the rally into the high $2,000s. However, Blofin warned:

The Ethereum Shanghai upgrade is just around the corner, yet this is not leading to increased selling pressure as most staked Ether is currently at a loss. However, the risk of a sell-off cannot be ignored, and the macro uncertainty around the upgrade is also increasing.

In the options market, Blofin records risk aversion among investors, which translates into a “stable” market dynamic. There are a few changes in ETH option contracts’ implied volatility (IV) and speculation around the cryptocurrency.

In that sense, most ETH options traders are taking long positions by buying short-term expiring call contracts. This dynamic could support further profits for ETH, but Blofin emphasizes the risk avert sentiment:

Most ETH option block traders are bullish on ETH after the Shanghai upgrade. Notably, some traders bought the call spread expiring in 2024q1, which is more likely to be a trade driven by risk management or arbitrage, given the ask-bid spread of yearly options.

Related Reading: Bitcoin Shows Parallels With 2017 Cycle, Here’s What Can Happen Next

Additional data from Bitfinex Alpha indicates a spike in the put-to-call ratio for ETH options. As seen in the chart below, the ratio stands below 1, which hints at predominate bullish sentiment among investors favoring call (buy) over put (sell) contracts.

Ethereum ETH ETHUSDT 2
ETH option contract put-to-call ratio below 1 indicates a bullish market sentiment. Source: The Block via Bitfinex Alpha

Chart from Tradingview, The Block

Tags: ETHethereumETHUSDT
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Reynaldo Marquez

Reynaldo Marquez

As an editor at NewsBTC, Reynaldo is an experienced journalist passionate about all things crypto. Reynaldo has interviewed key industry leaders, and created unique pieces analyzing the promise of crypto as the next frontier for an economic and social transformation of humanity. Since 2018, he has been at the forefront of the industry, closely following every major development and analyzing critical events at the heart of the crypto industry. With a keen eye for detail and an unwavering commitment to excellence, Reynaldo has been instrumental in bringing the latest news and insights to the crypto community. Outside of work, Reynaldo enjoys lifting weights and literature, which he believes gives him a unique perspective into the world of crypto. As an aspiring trader, he is always looking for new opportunities to explore and believes that crypto holds the key to unlocking the future of finance.

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