Key Points
- Bitcoin and Ethereum options implied volatility suggests a calm market in the coming weeks.
- Derivatives indicators reveal traders are purchasing puts to hedge against potential downside in Ethereum’s price.
The implied volatility for Bitcoin and Ethereum options, which predicts future price movements, suggests that traders anticipate a relatively quiet market in the near future.
Market Expectations
Analysts have noted that the current implied volatility rank stands at 40, and the implied volatility percentile is at 52. These mid-level indicators suggest that the market is not anticipating much activity.
The Deribit Volatility Index, which gauges the market’s expectation of future volatility for Bitcoin over the next 30 days, indicates that Bitcoin’s implied volatility has significantly decreased since mid-May.
Implied Volatility and Market Trends
Analysts from QCP Capital have noticed similar indications of a slow market. They stated that “implied volatility has been absolutely crushed after the spot Ethereum exchange-traded fund (ETF) approval despite prevailing catalysts.”
The U.S. Securities and Exchange Commission approved spot Ethereum ETFs on May 23. Unlike Bitcoin ETFs, which began trading the day after approval, Ethereum ETFs may not start trading for several weeks or months.
However, QCP Capital analysts also mentioned that a quiet market might be caught off guard, and they are betting on a bullish trend, particularly for Ethereum. They suggested a bullish Ethereum move could occur if spot Ethereum ETFs begin trading earlier than expected in June.
Derivatives Indicators and Market Expectations
Derivatives indicators show that traders are buying puts to protect against a potential drop in Ethereum’s price in the coming weeks. A negative put-call skew as of mid-June indicates some bearish expectations for the next two weeks.
The put-call ratio for Ethereum options has been on the rise since mid-May across multiple derivatives exchanges. A rising put-call ratio is often considered bearish as it indicates that more traders are buying put options relative to call options. Traders typically buy put options when they expect the price of an asset to decline, as they provide the right to sell the asset at a specified price.
This increased Ethereum put-call ratio follows the approval, but not the launch, of spot Ethereum exchange-traded funds by the U.S. Securities and Exchange Commission on May 23. This could suggest that some traders are considering hedging strategies in preparation for potential downsides if the launch of these financial products on exchanges is delayed.
