Ether (ETH) is down like the rest of the crypto market; however, Ethereum derivative metrics analyzed by the market intelligence platform Nansen have revealed that the cryptocurrency faces more downside tail risk in the coming days.

According to a report from Nansen, current implied volatility levels for ETH suggest low expected price movement. Still, analysts say this may be a misjudgment because of its recent price movements.

Ethereum Faces Downside Tail Risk

Nansen evaluated Ethereum derivatives metrics on the crypto options and futures exchange platform Deribit for the past week starting from February 25, month, and year to check if there is any hope for ether’s price.

The firm found that while the ETH options market still has a bullish bias, the significant call-side positioning appears increasingly at risk. This signaled a potential for further volatility, especially if the support levels at $2,200-$2,300 come under pressure. As of the report on February 25, ETH was worth around $2,395; however, the asset’s value had plummeted to $2,200 at the time of writing.

As of February 25, the put/call ratio was 0.46, indicating a call-side bias. Total open interest for Ethereum was over 1.860 contracts, with more than 1.278 calls and about 582,105 puts. There was a key strike concentration for calls between $2,700 and $3,100 and $2,200 $2,500 for puts. Additionally, the 90-day implied volatility (IV) for calls was 78.57, while puts were 76.49, with a slightly call-favored skew of +2.08 points.

“The 90-day implied volatility data show current IV levels (calls at 78.57, puts at 76.49) are much lower than in past years. The chart below shows that from 2020-2022, these levels were typically between 120-140 during “regular” market regimes and went above 160 during market stress. We observe a seemingly “break lower” in implied vol from 2023 on,” Nansen noted.

$2,500 Now Resistance Level

Nansen further mentioned that the Ethereum IV levels suggested traders were not expecting much price movement; however, this may have been a mistake because ether’s price at the time was close to key option strike levels, and market conditions were not bullish.

The analytics firm said ether’s future structure showed bearish signs, indicating near-term pressure. The $2,500 level changed from potential support to immediate resistance, with “dealer hedging likely to trigger selling pressure near the level. Dealer hedging refers to traders entering positions that will profit them if their primary investments turn into losses.