Ethereum Price Records 9% Rise, Why Traders Bet On More Profits

The Ethereum price has been trending to the upside over the past week as the general sentiment in the market improves. The second crypto by market capitalization could extend its gains if macroeconomic conditions continue to support the rally. 

As of this writing, the Ethereum price trades at $1,333 with sideways movement in the last 24 hours. Over the previous week, the cryptocurrency records a 10% profit and stands as one of the best performers in the top 10 by market cap. 

According to a report from analysis firm Blofin, the market sentiment has improved based on widespread reports about an economic recession. These expectations of worse financial data could force the U.S. Federal Reserve (Fed) to loosen its monetary policy. 

The financial institution has been hiking interest rates to put a hold on the highest inflation recorded in decades. As a result, the global market is suffering. If conditions decay too much, the market believes the Fed will backtrack, allowing Ethereum and other risk assets to rally. 

Today, the Fed will provide further light on its next steps; if it slows down, the Ethereum price will likely continue on its bullish trajectory. The positive expectations are spilling to other crypto financial sectors. 

According to Blofin, there have been positive developments in the futures and options sectors. The firm noted the shift in sentiment for Q1, 2023, compared to Q4, 2022:

A rebound of expectation is also underway. In the futures market, the positive basis term structure has been maintained for some time. Although the futures’ basis is still around the parity level, Investors’ implicit expectations are not pessimistic as they were in 2022q4.

A decline in the U.S. dollar supports the bullish continuation of the Ethereum price. As measured by the DXY Index (DXY), the currency is re-testing critical support allowing ETH and other risk-on assets to appreciate. 

However, the decline in the DXY hints at a spike in the crypto market’s Volatility. According to Blofin:

It is worth noting that the implied Volatility of front-month BTC options has increased somewhat. As the Dec CPI data is about to be released, the game between investors in the spot and derivatives markets may further increase the implied Volatility.

Implied Volatility measures future price movement for an asset. The analytic firm believes that the short-term metrics point to the upside, but the mid to long-term still shows “a relatively bearish attitude.” 

Options traders are accumulating calls (long positions) for BTC with an expiration date set for January 27. The strike price for these contracts stands at $18,000 and $19,000. In other words, crypto traders are betting on BTC (and therefore the Ethereum price) to be much higher than today’s levels by the end of the month.