As Ethereum approaches its highly anticipated Pectra upgrade, traders and investors are wondering whether the market will once again follow the historical trend of rallying ahead of such events. The Pectra upgrade, set to introduced in early April, is already fueling increased activity in Ethereum options trading, with traders positioning themselves for volatility ahead of the event.

Ethereum Options Traders Positioning for Volatility

Recent data from QCP Capital, a crypto options trading desk, shows that options traders are increasingly betting on a bullish scenario for Ethereum in the lead-up to the Pectra upgrade. Traders are particularly focused on volatility after March 28, with call options (bullish bets) gaining popularity. This has raised speculation about whether Ethereum’s price will climb as it has in previous upgrade cycles.

Historically, major Ethereum upgrades have been followed by significant price movements, with traders often engaging in the “buy the rumor, sell the news” strategy. This strategy suggests that Ethereum could rally in the lead-up to the upgrade, only to sell off shortly afterward. The last two upgrades, the Merge in September 2022 and the Shanghai upgrade in April 2023, followed this pattern.

For example, Ethereum surged over 100% from its June 2022 lows before the Merge event, only to sell off once the event had passed. Similarly, the Shanghai upgrade saw Ethereum rally by about 30% after the initial fears over increased supply proved unfounded.

What’s New with the Pectra Upgrade?

The Pectra upgrade promises significant improvements for Ethereum, including features like blob expansion and enhanced smart wallet capabilities. These scalability upgrades aim to make Ethereum more efficient and cheaper to use, with the network’s average transaction cost recently rivaling Solana’s with gas charges falling below 1 gwei. However, while the improvements are notable, there hasn’t been a substantial uptick in demand for Ethereum Layer 1 (L1) transactions as of yet. The real question is whether the Pectra upgrade will significantly increase demand for Ethereum’s L1 services.

Can Ethereum Hit $4K?

Despite the excitement surrounding the Pectra upgrade, Ethereum’s price action has remained relatively muted. However, recent options activity indicates that traders are still betting on a potential surge. In the last 24 hours, call options for price targets of $3.0k and $3.2k were among the most popular, while put options for the $2k mark were also being heavily purchased. This suggests traders are anticipating a move up to the $3.2k level, with $2k serving as a potential support level.

Interestingly, the options market remains relatively less optimistic about Ethereum reaching the $4k mark by the end of April. At the time of writing, traders are pricing in only a 14% chance that Ethereum will reclaim $4,000 by the end of April. However, the probability of Ethereum hitting $4k by June is higher, with a 25% chance for that scenario to unfold. This indicates that while traders are hopeful for a price increase in the short term, they may be more optimistic about Ethereum’s chances of reaching $4k in the summer months, after the Pectra upgrade has fully played out.

ETH Accumulation on the Rise

Despite Ethereum’s price being relatively flat, there has been significant accumulation of ETH by investors. On February 5 alone, 367,000 ETH were moved off exchanges, which signals a strong accumulation trend. This movement comes as Ethereum’s price dipped below the $3,000 mark, further indicating that long-term investors are preparing for potential future price increases. However, whether this accumulation trend will translate into higher prices depends largely on the broader market sentiment and overall investor confidence.

Will ETH’s Price Rally Pre-Pectra?

In conclusion, while Ethereum’s Pectra upgrade could potentially trigger a rally, the odds of Ethereum hitting $4k before the event appear slim, at least based on current market expectations. Nonetheless, the strong accumulation trend and increasing volatility around the upgrade suggest that Ethereum could still see a surge ahead of April. Traders and investors will be watching closely as the date of the Pectra upgrade approaches, hoping that history will repeat itself and lead to another rally for the king of altcoins.