Cryptocurrencies are bouncing back after some midweek dips, with Ethereum showing strong growth. Over the weekend, it recovered from losses, climbing from around $3,600 to its highest price since December last year. The big question now is whether Ethereum will break the $4,000 barrier. This level was last crossed cleanly in late 2021 when it peaked over $4,800 before falling. During the same time, Bitcoin also hit record highs above $60,000 but later dropped below $20,000. Ethereum struggled with the $4,000 mark last year, but it’s ready for another attempt. If it can break through, there may be more gains ahead, but a failure could signal this year’s peak. Globally, the trend for cryptocurrencies and collectibles remains strong this summer. According to Low, the setup around $4,000 is an excellent chance for options traders. Recent data indicates a build-up in call option interest, with over $3 billion focused at strikes between $4,000 and $5,000 for late June, reflecting a strong bullish sentiment in the derivatives market. We believe that positioning for a breakout is the way to go. The situation has changed dramatically since the last time Ethereum tested this price due to the SEC’s recent approval of 19b-4 filings for spot Ether ETFs. This approval is a significant catalyst, making a sustained price break more likely. Historically, assets see major inflows and price rises once such products start trading. For instance, Bitcoin rallied over 60% after its ETF launch in January. For traders expecting a breakout, buying call options with a strike price just above $4,000 could amplify this upward trend. Those wary of a possible rejection can purchase put options to guard against a sharp drop. Data from Deribit shows that demand for bullish calls is still higher than for bearish puts. We also see potential in strategies that benefit from increased volatility, regardless of the direction. A long strangle—buying an out-of-the-money call and put—could be effective as we near the launch of the spot ETFs. The market seems to be anticipating a big move, and while implied volatility is high, it may still underestimate the impact of active ETF trading. Finally, it’s important to keep an eye on the S-1 registration statements, as this is the last step before these new funds start trading. We believe the market is not fully grasping the potential inflows, which analysts at Standard Chartered estimate could be between $15 billion and $45 billion in the first year alone. This event will likely set the tone for the rest of the quarter.

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