Crypto traders are betting big on ether

Last week, block traders, typically institutions and large players, executed bull call spreads on ether, purchasing the $3,500 call options

Crypto traders are betting big on ether, with recent activity in the over-the-counter market suggesting a strong expectation of a bullish move to $6,000 by the end of the year.

Specifically, last week, block traders, typically institutions and large players, executed bull call spreads on ether, purchasing the $3,500 call options while simultaneously shorting an equal number of calls at the $6,000 strike, both set to expire on Dec. 26.

The traders executed the strategy via over-the-counter platform Paradigm, which was later listed on crypto exchange Deribit. They executed 30,000 contracts of the $3,500/$6,000 call spreads across 10 separate trades, spending just over $7 million in initial debt/cost.

The strategy will yield the highest profit if ether rises to or beyond $6,000 by Dec. 26. On Paradigm and Deribit, one options contract represents one ETH.

At the minimum, the large volume of the $3,500/$6,000 call spreads signals a preference for the price to move higher, and potentially a strong expectation of a bullish move to $6,000 by the end of the year. As of writing, ether changed hands at $2,510, according to CoinDesk data.

Now, if ETH stays below $3,600, the strategy will expire worthless, limiting the loss to the initial cost of $7 million. Another downside of this strategy is that traders stand to lose out on potential upside above $6,000 due to the short position at that strike level.

Ether's price has risen over 80% to $2,500 since early April, when the broader market panic saw ETH hit a low of around $1,390 on several exchanges.

Magadini said there is no reason to call tops in ETH right now.

"I continue to like these upside trades, especially for the beat-up Ethereum, as risk assets continue to rally. There's a good argument for ETH "catching-up" as spot ETFs with staking rewards could be a catalyst for institutional participation and sentiment turns around. No reason to be calling tops right now," Magadini said.