Ether Put-Call Ratio Hits One-Year High, Hints at Bullish Bias Despite Pause in Rally

The price of the token has retreated to $3,730 from its two-month peak of $3,973, according to CoinDesk’s data. There was significant upward momentum in prices last week following the U.S. SEC’s indication that it might approve the long-awaited spot Ether ETFs.

The ratio of open put and call contracts on Ether’s Deribit exchange, which signifies the difference between the number of active bearish (put) and bullish (call) contracts, reached a high of 0.61 earlier this Thursday. This is the highest level seen in the past year based on data from Glassnode.

As an analyst, I would interpret an increase in the ratio as a sign of a bullish outlook, implying that the underlying asset or market may be experiencing positive sentiment and potentially seeing price growth. However, it’s important to keep in mind that such ratio movements can be subjective and open to various interpretations.

With a put option, the purchaser is granted the ability to sell a particular asset at a predetermined price before a given expiration date. Experienced traders and investors often employ options for shielding against risks in the spot market and generating extra income on top of their coin reserves. An elevated level of trading activity involving put options can be attributed to investors seeking to safeguard their coin holdings (representing a bullish stance in the spot market) from unexpected price declines.

As an options trader, I might consider generating extra income by selling put options in an uptrending market. When I sell a put option, I’m essentially providing insurance against potential price declines to the buyer, and in return, I receive a premium payment.

From a optimistic standpoint, the increasing ratio aligns with higher call-put spreads across various time durations. Currently, the weekly skew amounts to 2%, while the skews for 30-, 60-, 90- and 180-day periods are above 5% based on Amberdata’s data. This pattern indicates a higher demand for call options or bullish wagers.

As a crypto investor, I would advise keeping an eye on the put-call open interest ratio’s trend. A persistently increasing ratio, with a value greater than one, may reflect excessive bullish sentiment among traders. This condition is often perceived as a warning sign by contrarian investors who believe a market peak is near. On the other hand, readings below 0.20 and lower can signal deep-seated bearishness, historically observed during bear market bottoms.