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Ethereum (ETH) has caught the attention of investors as its risk reversals turned negative for upcoming expiries, according to the data from QCP Capital, a crypto asset trading firm.
Notably, risk reversal is a measure of how much the market thinks prices might change. When ETH’s risk reversal goes negative, it suggests people are more worried about prices dropping. This change could be because more people want to buy put options, a kind of protection against possible losses if their bets on rising prices go wrong.
On the other hand, people who have invested in altcoins are also getting in on the action. They’re buying ETH put options to guard against potential downsides to their altcoin investments.
Interestingly, QCP raised a caution flag about the amount of borrowing happening in the market while adding that the rise in demand for put options, combined with risky bets on prices going up, makes investors worry about a possible market correction. In QCP Capital’s words:
“This makes us wary of a possible correction given the amount of leverage in the market. However, we think that the market will buy any dip aggressively.”
Further, Ethereum’s spot-forward spreads have gone down a bit. This is different from Bitcoin, where the spreads remain high. If Ethereum’s price falls suddenly, it might bring down future price differences too, especially if people who borrowed a lot of money to bet on rising prices get into trouble.
It is important to note that Ethereum is set to undergo the Dencun upgrade on March 13 as well, which will make Layer 2 blockchains more affordable and usable, as per a post on social media platform X by Altcoin Daily. The upgrade is expected to boost the network’s scaling via the integration of proto-dank sharding.
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