Ethereum options’ open interest (OI) rose to a new all-time high of $8 billion after Ethereum developers tentatively suggested that the date for the long-anticipated Merge may be Sept. 15. The world’s second-biggest cryptocurrency has been on the rise in the past several weeks and crypto traders expect that trend to continue until the Merge, after which they anticipate another price drop.
Ethereum Options Open Interest Hits $8B
Ethereum options open interest—a metric that refers to the number of active Ethereum derivative contracts—rose to a new peak of $8 billion, the latest data shows. The surge comes as Ethereum developers hinted that the blockchain’s most important network upgrade, The Merge, could occur on Sept. 15. Before this, Ethereum developers set a provisional date for the Merge for Sept. 19.
A new peak in Ethereum options open interest comes just after the blockchain completed its third and final public testnet merge, Goerli, coming just one step away from the mainnet merge. After completing the Goerli testnet merge, Ethereum’s gas fees plummeted to their lowest mark in more than a year.
It’s been a stellar couple of weeks for Ethereum, with its native token rising more than 60% in the past month. However, the cryptocurrency still remains down over 60% from its all-time high in November 2021.
Derivative speculators are accumulating call options as they expect Ether to continue its uptrend into September when the Merge is most likely to occur. However, futures and options numbers are indicating that crypto traders are bracing for another price drop in ETH after the Merge, which Glassnode analysts describe as a “sell-the-news”-type of situation. But Ethereum co-founder Vitalik Buterin recently said the upcoming Merge is not priced yet and will not be “until after it happens.”
“Post Merge, the left tail is pricing in significantly higher implied volatility, indicating traders are paying a premium for ‘sell-the-news’ put-option protection post-Merge.”
– Glassnode analysts
Why Is Merge So Important?
Earlier this week, Ethereum successfully completed its final testnet merge known as Goerli. This marked the last important development for the blockchain before it transitions from proof-of-work (PoW) to the proof-of-stake (PoS) model next month.
This transition, which represents a groundbreaking upgrade for Ethereum, is set to slash the blockchain’s energy use and carbon emissions by 99%. It will also make Ethereum no longer reliant on miners and instead allow individual users to stake the native tokens and become the so-called “validators.”
While everyone in the crypto world is excited about the Merge, there are some who are not convinced that the upgrade will occur seamlessly. Galois Capital’s Kevin Zhou thinks it is “very dangerous” not to consider the outcome if the update doesn’t go as smoothly as expected. He also believes the current PoS chain would represent 5% of Ethereum’s value after the Merge, while the new PoS would make up 95%.