Ethereum Merge

Expiring Ethereum Options Contracts: Market Impact and Reduced ETH Supply

  • Crypto derivatives traders bet more on Ethereum options than Bitcoin.
  • Minimal impact on the Ethereum options market due to current index neutrality.
  • Reduced Aether supply due to Aether melting and burning via London update.

Ethereum options contracts, which have a maximum pain point of $1,950 and a face value of $4.2 billion, are about to expire.

Crypto derivatives traders have recently been dabbling in more Ethereum options than Bitcoin ones. The put/call ratio for Ethereum options is 0.83, which is considered bearish.

In contrast, current Bitcoin options indices are not overwhelmingly leaning in either direction and are considered neutral.

Market impact and price correction of Ethereum (ETH)

The impact on the Ethereum options market is expected to be minimal, as Kraken wallets have withdrawn a large chunk of staked ETH in recent days, and the current options index is not overwhelmingly leaning in either direction.

ETH price is down 8.5% from its recent high of $2,136 on April 17, and the downside could see ETH find support in the $1,850 price zone.

Reduction in the supply of ETH

Over the past 217 days, the total supply of ETH has decreased by 103,092 coins, worth over $200 million at current prices, due to the merger that moved Ethereum away from a proof-of-work consensus mechanism that consumes a lot of energy to a more environmentally friendly proof-of-stake method.

If the merger had never happened and Ethereum remained secured by miners, unlike the participants, the ether supply would have increased by more than 2.52 million coins, or $4.9 billion. The supply of native Ethereum coins would have also increased by 3.53% per year.

Reduction in ETH supply due to ether burning

Although the Ethereum merger has catalyzed the reduction in the supply of native ETH coins, it did not implement the burning of ether. Instead, this tokenomic aspect was triggered by the Ethereum Improvement Proposal 1559 (EIP-1559) that was pushed through the London update.

EIP-1559 was designed to put deflationary pressure on the ether supply, as the base fee is burned and can no longer be used on the network, thus reducing the amount of inflation on the Ethereum network.

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