Ethereum is trading around the $2,650 mark, down 5% over the past 24 hours, as traders express concerns about further declines following Friday's Bybit hack, which exerted significant selling pressure on the second-largest digital asset by market cap.
Cryptocurrency derivatives trader Gordon Grant noted that investors are increasingly seeking protection against potential price drops. He suggested that Bybit's recent purchases of ether to mitigate the impact of Friday's record exploit may have concluded, and there's a looming risk that the stolen ether could be sold, potentially driving prices lower.
"One could posit that demand for further protection to the downside and reflex-driven call selling in the front end is driving one-week skew behavior, given the balance to risks of replacement buying of ether by Bybit having finished and the eventual sales of hacked ether remaining," Grant told The Block. He highlighted derivatives data showing that shorter-dated skews for ether have recently shifted towards being bid for puts over calls.
Highlighting the bearish sentiment, Grant noted that following the hack, the one-week 25-day risk reversal surged to as much as 15 vols over for puts. He explained that this spike occurred as traders exhausted their downside protection, leading one-week at-the-money volatility to jump from around 50 to nearly 65.
Analysts at QCP Capital also observed that ether options risk reversals indicate mounting concerns of further downside into March expiries, as derivatives traders remain cautious with the Bybit hacker now holding enough stolen ether to become the 14th largest ETH holder.
On Friday, the Bybit cryptocurrency exchange suffered a security breach resulting in the theft of approximately 401,000 ether, valued at around $1.5 billion. The attack occurred during a routine transfer from a cold wallet to a hot wallet, and the North Korean Lazarus Group is suspected to be behind the incident.
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