Ethereum (ETH) surged over 10% from Monday to Tuesday, reaching $2,794—the highest level in 15 weeks. Despite this strong rally, ETH has struggled to sustainably break above the critical $2,800 resistance for over a month. This persistent barrier coincides with a growing preference among options traders for downside protection strategies, signaling underlying market caution despite bullish price action.
Understanding how traders use derivatives—especially options—can reveal valuable insights into market sentiment. Beyond simple buy (call) and sell (put) positions, sophisticated investors combine instruments to manage risk or amplify returns. Monitoring shifts in options demand helps identify whether professionals are positioning for a breakout, breakdown, or consolidation.
Rising Demand for Downside Protection in ETH Options Market
From early April through mid-June, open interest in ETH options climbed from $6.3 billion to $8.3 billion, reflecting increased institutional participation. Deribit remains the dominant exchange, capturing 72% of the market share. With such concentration, analyzing the balance between bearish and neutral-to-bullish flows becomes essential.
One of the most notable strategies observed over the past two weeks is the bear risk reversal. This approach profits from declining prices while generating upfront premium income. It involves buying put options to gain downside exposure and simultaneously selling call options to offset costs. The net effect is a low-cost hedge that benefits if ETH drops below the put strike price.
Another widely adopted strategy is the bearish diagonal spread, which expresses short-term bearish sentiment in a capital-efficient way. Traders sell near-term call options and buy longer-dated calls at higher strike prices. This setup capitalizes on time decay (theta) and potential increases in implied volatility—common during uncertain or volatile markets.
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Bullish Signals Amid Bearish Hedging Activity
Despite rising demand for downside protection, the broader options landscape suggests underlying bullish momentum. Ahead of the June 27 monthly expiry, 63% of total open interest in ETH options consists of call options (bullish bets). More significantly, 92% of all put options have strike prices at or below $2,700. If Ethereum closes above that level at expiry, these puts will expire worthless—benefiting sellers and pressuring buyers.
This structure implies that while traders are hedging against short-term pullbacks, they aren’t positioning for a major collapse. Instead, many appear to be using puts as insurance rather than directional bets. Meanwhile, call-heavy positioning supports the idea of continued upside momentum into Q3 2025.
Competitive Pressure and Market Sentiment Challenges
A key factor tempering enthusiasm is Ethereum’s outperformance relative to other major altcoins. Since May, ETH has gained 49%, far outpacing Solana (SOL), up 8%, and XRP, up just 2%. This disparity raises concerns about sustainability, especially with regulatory developments on the horizon.
Market participants are closely watching the U.S. Securities and Exchange Commission (SEC) for potential approvals of spot ETFs for competing altcoins. If greenlit, such products could shift institutional capital away from Ethereum, challenging its dominance in the smart contract platform space.
Additionally, Bitcoin continues to dominate institutional narratives. Recent moves by high-profile figures—such as the announcement from Trump Media & Technology Group raising $2.5 billion in debt and equity to build a Bitcoin reserve—have reinforced BTC’s status as the preferred digital asset for macro exposure.
Bo Hines, Executive Director of the White House Presidential Advisory Council on Digital Assets, added fuel to this trend by stating that details on a potential U.S. strategic Bitcoin reserve would be revealed “soon,” noting that “the community will be very pleased.”
This growing focus on Bitcoin as national or strategic infrastructure may indirectly affect Ethereum’s appeal in the eyes of large-scale investors—a phenomenon often described as Bitcoin “drinking the milkshake” of altcoins.
Are the Bears Wrong About Ethereum?
While bearish options strategies are gaining traction, their prevalence doesn't necessarily indicate an expectation of price collapse. Rather, they reflect prudent risk management amid elevated valuations and macro uncertainty.
The structural bias in open interest—calls outnumbering puts and most puts concentrated below current price levels—suggests that sophisticated traders expect Ethereum to hold above $2,700 and potentially push higher. The $2,800 resistance remains key; a confirmed breakout could trigger short squeezes and accelerate momentum toward $3,000.
Furthermore, Ethereum’s fundamentals remain strong:
- Ongoing network upgrades improving scalability and efficiency
- Growing adoption of layer-2 solutions
- Expanding use cases in DeFi, NFTs, and tokenized assets
These drivers support long-term confidence even when short-term volatility prompts defensive positioning.
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Frequently Asked Questions (FAQ)
Q: Why are traders buying put options if ETH price is rising?
A: Put purchases often serve as insurance against sudden downturns rather than outright bearish bets. With ETH up 49% since May, many holders use puts to protect profits without exiting their positions.
Q: What does high call option open interest mean for ETH?
A: Elevated call volume indicates strong bullish sentiment. With 63% of June 27 expiry contracts being calls, traders anticipate further upside, especially if $2,800 breaks convincingly.
Q: Can ETH sustain its rally amid Bitcoin dominance?
A: While Bitcoin attracts more institutional headlines, Ethereum maintains leadership in decentralized applications. Its ecosystem strength supports sustained interest even during periods of BTC-focused narratives.
Q: How do risk reversals impact ETH price?
A: Bear risk reversals involve selling calls and buying puts. Heavy usage can create downward pressure near expiry if dealers need to hedge dynamically, but it doesn’t override fundamental momentum.
Q: What happens if ETH exceeds $2,800?
A: A sustained move above $2,800 could invalidate many bearish hedges and trigger technical buy signals, potentially opening the path to $3,000.
Q: Is options activity a reliable predictor of future price?
A: Options data reflects sentiment and positioning but isn’t foolproof. It works best when combined with technical analysis, on-chain metrics, and macro trends.
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Conclusion
Ethereum’s climb toward $2,800 reveals a market at an inflection point. While options flows show increased hedging activity, the overall structure favors bullish outcomes. The concentration of puts below $2,700 and dominance of call open interest suggest that professionals are preparing for further gains—not a crash.
Competitive pressures and Bitcoin-centric macro stories add complexity, but Ethereum’s technological momentum and ecosystem depth provide solid foundations. Whether the bears are wrong depends on how decisively ETH clears key resistance—and whether institutional capital begins rotating back into altcoins in the second half of 2025.