The upcoming launch of US-based exchange-traded funds (ETFs) tied to the spot price of Ethereum (ETH) has led to an increase in hedging activities among investors.
Ethereum Hedging Increases as Ethereum ETF Launch Nears
This trend is evident from ETH's persistent volatility premium over Bitcoin (BTC) as investors rush to the options market to protect or hedge their positions from potential price fluctuations.
Estimated volatility, which reflects market expectations for price fluctuations over a given period based on options data, has increased over various time periods.
According to data from Deribit and Kaiko, demand for options or derivatives that protect against price volatility has increased. Call options protect against price rallies, while put options offer insurance against price declines.
The increase in hedging activities has become more evident in short-term contracts.
Latest data shows that the assumed volatility of options contracts expiring July 19 increased from 53% on Saturday to 62% on Monday, exceeding the assumed volatility of contracts expiring July 26.
“The rise in the July 19 contract shows that investors are willing to pay more to maintain their current positions and hedge against sharp price movements in the short term.
This increase in IV in near-term contracts indicates a level of uncertainty among investors,” Kaiko analysts said in their Monday newsletter.
Investors also expect volatility to increase in Ethereum compared to Bitcoin.
Data from Amberdata shows that the difference between Deribit's 30-day Ethereum and Bitcoin forecast volatility indices (BTC DVOL and ETH DVOL) has consistently averaged around 10% since late May, significantly higher than the 5% average in the first quarter. shows that it is.
*This is not investment advice.
