ETH ETF performed poorly on its first day of listing. Will the price drop repeat history?

Original title: ETH ETFs Approved: Will History Repeat with a Price Drop?

Original author: Anand Raj, Deribit

 

Market View

 

The spot Ethereum ETF will start trading on Tuesday, but despite the approval, ETH prices have not risen significantly, and the put/call ratio indicates potential downside. Historically, new crypto listings usually lead to price corrections.

 

Put Butterfly Strategy

 

The recommended strategy is the Put Butterfly Strategy. The Butterfly Spread with Puts is a three-part strategy that involves buying one put option at a higher strike price, selling two put options at a lower strike price, and then buying one put option at a lower strike price.

 

If you are concerned about the decline in ETH prices, you can consider executing this strategy.

 

Trade Structure

 

(OTM Put) Buy 1x ETH-09AUG24-$3,400-P @ $144.5

(OTM Put) Sell 2x ETH-09AUG24-$3,300-P @ $105

(OTM Put) Buy 1x ETH-09AUG24-$3,200-P @ $75

 

Target: Spot Level = $3,300

 

Payment

 

Max Profit: $90.5/ETH

Strategy Debit: $9.5/ ETH

 

 

Why should we take this trade?

 

The spot Ethereum ETF has received final approval and will begin trading on Tuesday. According to Deribit data, the put/call ratio for the August 9 expiration has surged to 1.19.

 

 

This shows that the number of put options is higher than the call options, indicating that traders are expecting a possible immediate decline or are looking to hedge against price declines. Despite the approval news, the price of ETH has not risen significantly. Since May, the cryptocurrency market has been full of anticipation for the ETF approval. However, ETH's market capitalization has performed poorly compared to other cryptocurrencies, as shown in the figure below.

 

 

I have written a detailed insight on crypto product post-listing performance. Historically, regulated exchange products tend to correct after listing. This pattern was exemplified by the launch of CME Bitcoin futures in December 2017, the Coinbase IPO in April 2021, the futures-based Bitcoin ETF in October 2021, and the spot-based Bitcoin ETF in January 2024.

 

For more information, see the June 27 insight here .

 

From the technical chart of ETH, although the spot ETH ETF has been approved to start trading on Tuesday, the selling pressure on the underlying asset seems to have increased and the price has not risen significantly. I expect the price of ETH to fall to $3,300, exactly to the support point highlighted by the yellow line in the attached ETH chart.

 

Therefore, traders can consider deploying a bearish butterfly strategy to take advantage of the expected price movement.

 

To execute this method, traders can buy put options with a higher strike price (for example, $3,400), while selling double the number of put options at a lower strike price (for example, $3,300) and buying put options at an even lower strike price (for example, $3,200).

 

The trader will get the maximum profit from this strategy if the ETH price is $3,300 when the options expire on August 9.

 

If the market improves, the potential loss is limited to the initial $9.5.

 

 

How to make this trade on Deribit?

 

Step 1: Go to the COMBO book under the "Strategies" tab and create a COMBO.

 

Step 2: Click on "RFQ" and send your order to the COMBO list.

 

Step 3: Go to the COMBO list (ETH), click on your strategy and execute.

 

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