The anticipation of the U.S.-listed ether ETFs’ imminent debut has led to an increase in hedging activity in the options market, as investors seek to protect their existing positions from price swings. The relative richness of ether’s short-term options-induced implied volatility suggests a pick-up in hedging activity.
U.S.-Listed Ether ETFs to Begin Trading Next Week
The impending launch of U.S.-based exchange-traded funds (ETF) tied to ether’s spot price has created a sense of urgency among investors, who are flocking to the options market to hedge or protect their existing market positions from price volatility. Implied volatility (IV), which measures options-derived market expectations for price turbulence over a specific period, has ticked higher across timeframes according to data sources Deribit and Kaiko.
Increased Demand for Options and Derivatives
A call protects against price rallies, while a put offers insurance against price slides. The hedging activity has been more pronounced in short-term contracts, as evidenced by the recent relative richness of implied volatility determined by options contracts expiring on July 19 relative to those expiring on July 26.
IV for Short-Term Contracts
According to Kaiko, the July 19 expiry IV rose from 53% on Saturday to 62% on Monday, topping the July 26 expiry IV. This increase in IV suggests that traders are willing to pay more to hedge existing positions and protect against sharp price moves in the short run.
The increase in IV on the July 19 contract suggests traders are willing to pay more to hedge existing positions and protect against sharp price moves in the short run. This spike in near-term contracts IV indicates a level of uncertainty among traders.
Analysts at Kaiko, Monday’s edition of the newsletter
Ether Volatility Relative to Bitcoin
Traders also expect increased ether volatility relative to bitcoin. According to data source Amberdata, the spread between Deribit’s 30-day ether and bitcoin implied volatility indices (BTC DVOL and ETH DVOL) has consistently averaged around 10% since late May, significantly higher than 5% in the first quarter.
Crypto Exchange Bybit and Analytics Firm BlockScholes Observations
Bybit and analytics firm BlockScholes made a similar observation in a report shared with CoinDesk on Monday. The key findings indicate that investors are increasingly optimistic about ETH, particularly in anticipation of the imminent launch of the first Ether Spot ETFs in the United States.
Key findings indicate that investors are increasingly optimistic about ETH, particularly in anticipation of the imminent launch of the first Ether Spot ETFs in the United States. This optimism is reflected in ETH’s sustained volatility premium over BTC, which has persisted amid heightened market activity.
Report shared with CoinDesk on Monday by Crypto Exchange Bybit and Analytics Firm BlockScholes
Consistency with Uber-Bullish Expectations
The pick-up in hedging activity in ether is consistent with the uber-bullish expectations from the spot ether ETFs, which are expected to begin trading next Tuesday. According to Gemini, spot ether ETFs will likely draw $5 billion in net inflows in the first six months, boosting ether’s market value relative to bitcoin.
Avoiding a Sell-the-Fact Phenomenon
Besides traders, mindful of the ‘sell-the-fact’ phenomenon that followed the debut of bitcoin ETFs on Jan. 11, might be preparing for similar price volatility in ether. However, traders should note that the present market mood and ether’s bullish positioning are significantly more measured than bitcoin in early January.
Traders, however, should note that the present market mood and ether’s bullish positioning are significantly more measured than bitcoin in early January, suggesting low odds of a post-debut sell-the-fact pullback.
BlockScholes report shared with CoinDesk on Monday
