Ethereum
ETH Implied Volatility Skyrockets: What It Means
Tomiwabold Olajide
Ethereum’s Implied Volatility on Short-Term Options Contracts Has Risen Sharply
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According to on-chain data provider Kaiko, Ethereum implied volatility (IV) on short-term options contracts has increased significantly over the past week. In this case, Deribit ETH options expiring on July 19 and 26 have seen the most dramatic adjustments. Implied volatility for July 19 rose from 53% on Saturday to 62% on Monday, outpacing the longer-term contract on July 26.
According to KaikoThe reversal could indicate that traders were expecting a market event to occur, as reports on Monday claimed that spot ETH ETFs could begin next week.
The increase in implied volatility on the July 19 contract indicates that traders are willing to pay more to cover their current positions and protect themselves against large price movements in the near term.
This increase in implied volatility of short-term contracts may reflect a level of uncertainty among traders.
Aside from a spike in implied volatility, liquidity conditions have remained stable, despite the usual drop in trading volumes during the summer months. Since the ETF approval in May, ETH’s 1% market depth has remained stable at around $230 million. It had fallen below $200 million in early May, but reversed its downward trend once the SEC approved spot ETFs.
The launch of spot ETFs should improve liquidity conditions for ETH, as has been the case for BTC since its inception in January.
Ethereum Could Outperform Bitcoin After ETF Debut
The upcoming launch of Ethereum spot exchange-traded funds could help the cryptocurrency continue to outperform its larger rival Bitcoin, according to Kaiko.
The price of Ethereum versus Bitcoin, reflected in the ETH vs. BTC pair, fell from 0.045 to around 0.05, following the first stage of approval of Ether ETFs by the U.S. Securities and Exchange Commission.
Ethereum’s price, however, has dropped by nearly 10% to $3,380. However, Kaiko says that doesn’t tell the whole story and that the improved ratio bodes well for the cryptocurrency’s success once ETFs begin trading.
At the time of writing, ETH was up 1.48% over the past 24 hours at $3,400 and up 11% over the week.
About the Author
Tomiwabold Olajide
Tomiwabold is an experienced cryptocurrency analyst and technical analyst. He pays special attention to cryptocurrency research, conducting comprehensive price analysis and trading forecasts on estimated market trends. Tomiwabold graduated from the University of Lagos.