A concealed signal from the derivatives market indicates that ether’s (ETH) rally might gain momentum, quickly pushing valuations to $4,400.
The indicator in focus is the net gamma exposure of dealers and market makers within the Deribit-listed ether options market. Gamma is a pivotal metric for options traders, reflecting how an option’s delta—its sensitivity to the underlying asset’s price—transforms in response to market fluctuations.
When dealers are short gamma, they must buy the underlying asset as its price rises and sell as it decreases, often amplifying directional movements. Dealers inject liquidity into the order book and profit from the bid-ask spread, continuously aiming to maintain a price-neutral net exposure.
Currently, there is a significant build-up of short gamma between strikes $4,000 and $4,400, as per data from Amberdata. With ether surpassing $4,000, dealers might purchase the asset to hedge their exposure, igniting a self-reinforcing positive feedback loop that could swiftly elevate the price to $4,400. This threshold is where the gamma dynamic shifts to positive, compelling dealers to trade against the market and stabilize price volatility.
This renders the $4,400 level a rational price magnet for the ongoing rally.
“If market momentum is sufficiently strong to surpass $4,000, we anticipate that dealers will become net buyers of ETH at higher prices, potentially spurring a rapid ascent to $4,400, which is the next significant gamma inventory level,” stated Greg Magadini, director of derivatives at RialCenter.
Leave a Reply