Traders in the options market are betting on price weakness for Ethereum’s native token Ether (ETH) as it fell to a six-week low on Tuesday. The second-largest cryptocurrency by market value dropped to $1,815 during Asian hours, according to market data. This bearish sentiment is further reflected in the six-month call-put skew, which gauges the spread between implied volatilities for call and put options expiring in 180 days, slipping to -0.91, the lowest since June 15.
The U.S. Securities and Exchange Commission (SEC) is looking to categorize most cryptocurrencies except Bitcoin as securities, subjecting them to stringent oversight. Markus Thielen, head of research and strategy at crypto services provider Matrixport, believes that Ether’s price appears vastly overvalued compared to its dwindling revenues. Data tracked by Matrixport shows that Ethereum’s average monthly revenue now stands at $178 million, or 364% lower than the $826 million figure seen during the bull market days of 2021. Additionally, staking or locking coins in the Ethereum network in return for rewards is less rewarding than a few months ago, with the average staking yield of 4.98% now less than the benchmark U.S. interest rate of 5.25%-5.5%.
Based on one quantitative approach, Ether’s fair value appears closer to $1,000 or 46% lower than current prices ($1,856), Thielen said. While we do not necessarily predict such a decline, there is a zero-cost way to position for this decline (zero-cost, but not zero-risk). This zero-risk strategy involves buying a December expiry at-the-money (ATM) Ether put and financing it by selling an ATM Bitcoin December expiry call.