Optimism From Ethereum’s Shapella Upgrade Is Fading, Crypto Options Show
Two weeks after the upgrade, the options market is assigning a slightly more negative sentiment to ether.
Two weeks after Etheruem’s Shapella upgrade, the crypto options market is signaling a higher perceived risk of downside volatility in the smart contract blockchain’s native token, ether (ETH), than market leader bitcoin (BTC).
On Tuesday, options tied to ether and bitcoin signaled a bias for puts or bearish bets that offer the purchaser protection against price slides. However, the demand for puts in the ether market was stronger than in the bitcoin market.
While ether’s one-month bearish out-of-the-money (OTM) puts traded at a five volatility points premium to bullish OTM calls, bitcoin’s OTM puts traded at a three-point premium to calls, according to options 25-delta risk reversal data tracked by crypto derivatives analytics firm Block Scholes.
“ETH’s [risk reversal] skew has now reversed its post-Shapella recovery relative to BTC options, now pricing OTM puts at a 5 vol premium to calls at a 1-month tenor,” Andrew Melville, research analyst at Block Scholes, wrote in a research note on Tuesday.
“This suggests a return to the slightly more negative sentiment assigned to ETH that we have commented on throughout this year,” Melville added.
Implied volatility refers to investors’ expectations for price turbulence over a specific period. An increase in IV represents an uptick in demand for options and lifts options premiums. Read More…
