- 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.
- "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.
- 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.
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.