Ether Traders May Be Hedging Against DeFi Slowdown: Analyst

Some are calling the white-hot Defi space a bubble that is unsustainable.

AccessTimeIconSep 10, 2020 at 11:17 a.m. UTC
Updated Sep 14, 2021 at 9:54 a.m. UTC

Options market data shows increased activity in ether (ETH) puts, or bearish bets. According to one trader, that reflects fears of a drop in prices led by a slump in decentralized finance (DeFi).

  • Ether's put-call volume ratio – a measure of activity in put options relative to calls (bullish bets) – rose to 2.45 on Wednesday.
  • That's the highest level since Oct. 31, 2019, according to data source Skew.
  • In other words, more than two put options were traded against every call option – a sign of bearish market sentiment.
Ether put-call volume ratio
Ether put-call volume ratio
  • "The message between the lines is likely that traders want a hedge [via put options] against the activity in DeFi, which has been the primary driver of ether prices," Vishal Shah, an options trader and founder of Polychain Capital-backed derivatives exchange Alpha5, told CoinDesk.
  • Indeed, some commentators believe DeFi's staggering growth has become a price bubble and is unsustainable.
  • "DeFi is a rerun of the 2008 asset-backed finance bubble on speed," blockchain consultant Maya Zehavi tweeted on Wednesday.
  • The space faces other issues, too, such as congestion and soaring "gas" fees on Ethereum resulting from heavy network usage by DeFi projects and stablecoins.
  • In August, miners made over $110 million from fees, according to data source Glassnode.
  • Alongside a general crypto market downturn, the total value locked in the DeFi applications has declined sharply from $9.6 billion to $6.11 billion in the past eight days, according to DeFi Pulse.
  • Ether's price fell from $480 to $320 last week.
  • However, investors expect deeper price drops, if any, to be short-lived because call options expiring in three and six months are still drawing higher prices than puts.
Ether put-call skew
Ether put-call skew
  • The one-month put-call skew, which measures the cost of puts relative to calls, is currently seen at 6.8%, indicating an increased demand for bearish put options.
  • But the three- and six-month skews remain well below zero, implying long-term bullish expectations.
  • At press time, ether is trading near $365.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to to register and buy your pass now.