Ether options’ implied volatility remains elevated, analysts say
Quick Take
- Uncertainty around the future price of ether has kept its options implied volatility elevated, according to analysts.
- Bitcoin’s implied volatility has seen a substantial reduction, indicating a trend toward stability in the bitcoin market.
Uncertainty surrounding the future price of ether is keeping the asset’s options implied volatility at a much higher level than that of bitcoin, analysts said.
In contrast, bitcoin’s implied volatility has seen a more dramatic reduction, indicating that derivatives traders perceive the bitcoin market to be trending towards stability.
Implied volatility (IV) is a measure used in the options market that represents the market’s forecast of an asset or security’s likely movement or price fluctuations in the future.
According to The Block’s data dashboard, ether’s IV has not declined to the same extent as bitcoin’s in the current post-halving market adjustment period. The bitcoin volatility index fell from 72% at the time of the halving event to a multi-month low of 55%. In contrast, the same metric for ether saw a less dramatic decline, from 76% to a current value of 65%.
Elevated ether volatility risk premium
According to this week’s Bitfinex Alpha report, options traders’ uncertainty about the medium-term price of ether is reflected in the asset’s volatility risk premium (VRP). The report outlined how the ether options market is showing a less dramatic reduction in VRP than that associated with bitcoin options.
Bitfinex analysts highlighted uncertain market conditions toward the end of the month for the second-largest digital asset by market cap, driven by the impending deadline for the U.S. Securities and Exchange Commission’s (SEC) decision on two spot ether ETFs.
"A possible reason for the ether volatility risk premium to drop less than that for bitcoin, is that the SEC’s ETF decision on May 23, 2024 acts as an additional uncertainty for the ether price," Bitfinex analysts added.
According to this week's Bitfinex Alpha report, options trader's uncertainty about the medium-term price of ether is reflected in the asset's volatility risk premium (VRP).
RELATED INDICES
According to TradingView data, in the recent post-halving market adjustment period, the bitcoin volatility risk premium (VRP) came down to 8%, while ether's VRP dropped to 18%.
Ether's option risk reversal still negative
Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.
© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.