Ether options’ implied volatility remains elevated, analysts say

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).

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Ether volatility risk premium is shown in orange, that for bitcoin is shown in red. Image: TradingView.

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