Ethereum: Falling Into the Abyss of Irrelevance

Bitcoiners face a defining showdown—a battle between Diamond Hands and...

Author

Markus Thielen
February 04, 2025

👇1-11) As we detailed in yesterday’s report, the crypto crash was driven by overleveraged Ethereum long futures positions, coupled with aggressive put option buying. This led to significant delta hedging, amplifying the sell-off when Trump’s comments about short-term pain from tariffs triggered a cascading decline.

👇2-11) Ethereum’s 1-week skew spiked to +9.9%, slightly exceeding the mid-December level, when puts were priced 9.6 volatility points higher than calls. However, the skew has now normalized, as Bitcoin has rebounded to $102,600, aligning with its early January high.

Bitcoin rallied back into the (purple) wedge.

👇3-11) This is a key moment for traders to reassess their positioning moving forward. The tariff risks from Colombia, Mexico, and Canada were quickly priced in, allowing the market consolidation to continue. However, larger trade disputes loom, particularly with China and the European Union—two economies that are far less likely to capitulate as quickly as America’s immediate neighbors.

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