Ethereum ‘Undervalued’ as New ETH Options with $20k Strike Price Added on Deribit

The imminent launch of Ethereum futures on the CME can lead to competition for flow vs. Bitcoin and legitimize ETH for institutional investors, making the market “very bullish on the digital asset.


Today's Ethereum’s day as the second-largest cryptocurrency made a new all-time high at $1,440 after a long three years of wait.

Finally, ETH caught up with Bitcoin, which hit its 2017 peak in mid-December 2020.

Amidst the new highs, crypto derivatives platform Deribit added a new ETH options contract with a strike price of $20,000 with Dec. 21 expiry, up from $10,000 strike price options contracts added in the first week of January.

Ethereum open interest (OI), meanwhile, has also advanced to a new all-time high above $4.5 bln. Binance is currently leading the pack in OI for ETH futures at $1.1 billion.

Things in the derivative space would get interesting for the digital asset with the launch of ETH futures on CME next month.

The regulated futures platform has captured a bigger share of Bitcoins futures space and holds the highest place in terms of OI, which only spells more bullish price action for ETH. Denis Vinokourov of Bequant wrote,

“Bitcoin maximalists may not agree, but the imminent launch of Ethereum futures on the CME will lead to competition for flow vs. Bitcoin. This flow may at first center around secondary market trading inefficiencies, but eventually, the very same institutional investors that bought into the idea of Bitcoin may also contemplate an allocation to Ethereum.”

Moreover, the CME ETH futures launch will legitimize the digital asset for institutional investors to own, which according to Pantera Capital, fits in their tech disruption bucket “fairly easily.”

“Very Bullish on Ethereum”

When it comes to the network, the amount of ETH transferred by smart contracts spiked in early 2021 and is now approaching the ATH set in mid-September 2020 during the height of DeFi mania.

Despite this increase in ETH transferred by smart contracts, the media transfer value of ETH remains well below August and September highs.

On-chain activities over the past week have been quiet on both Bitcoin and Ethereum. ETH’s transaction fee also dropped after a stretch of new ATHs while BTC’s regained some, but the daily average of ETH transactions fees still remains about twice as much as BTC.

According to Joey Krug, co-CIO of Pantera Capital, the “base money collateral for the new financial system” is “undervalued.” This is because of DeFi, built on Ethereum, has grown from $1bn in Jan 2020 to $16bn in Jan 2021 and pays more in fees than Bitcoin. Krug wrote in the letter to investors last week,

“Ethereum’s launch was a watershed moment in finance and enabled for the first time financial contracts without requiring a trusted third party to engage in a financial transaction. Bitcoin did this for digital gold/wealth storage, but Ethereum is doing it for finance.”

And although it is often hard to use and seems complicated, most revolutionary technologies are, said Krugs. He expects Ethereum to provide even more value for crypto users this year. Continued lock-up of ETH combined with these fundamentals and “historically low valuation relative to Bitcoin” has the investment firm “very bullish on Ethereum.”

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