Ethereum has been facing increased selling pressure following the Bybit security breach on Friday, falling 5% in the past 24 hours to trade around $2,650.
Concerns are growing among traders that further declines could be on the horizon as the market reacts to the effects of the hack.
According to crypto derivatives expert Gordon Grant, investors are actively seeking protection against potential downside risks. Grant suggested that Bybit’s efforts to stabilize the market by buying ETH in response to the attack may have come to an end, increasing the likelihood that the stolen assets will be sold off, putting further pressure on ETH prices.
“Given the balance of risk around the end of Bybit’s ETH purchase and the eventual sale of the remaining hacked ETH, it is plausible that further downside protection demand and reflexive call option sales on the frontend led to a week of skewed behavior,” Grant said.
Grant highlighted investors’ bearish outlook, pointing to derivatives data showing that short-term distortions have shifted toward increased demand for puts over calls. Following the attack, the one-week 25-day risk reversal in favor of puts rose as much as 15 volatility points. He noted that this increase was due to investors exhausting their downside protection, which caused one-week breakeven volatility to rise from around 50 to around 65.
Analysts at QCP Capital echoed these concerns, noting that risk reversals in ETH options signal fears of further declines leading up to March maturities.
*This is not investment advice.
