Ethereum
Bitcoin halving jitters disappear as traders bet on calm markets – here’s what it means for prices – DL News
- Bitcoin and Ethereum are still falling.
- But the drop in volatility suggests a rally is coming.
After a rough start to the month, traders in the options market are betting on smooth sailing for Bitcoin and Ethereum.
Using the market yardstick known as the volatility risk premium, Bitfinex analysts say they have noticed significant changes in the two most popular cryptocurrencies.
Bitcoin
For Bitcoin, the premium fell from 15% on April 30 to just 2.5%. The decline suggests investors are expecting less volatility in the immediate future, Bitfinex analysts said.
The outlook for market stability is a turnaround after nervousness, including Federal Reserve policy and tensions in the Middle East, helped send Bitcoin to a two-month low of $56,800.
Concerns over Bitcoin’s halving last month have eased, leading some to predict a price as high as $180,000 by the end of the year.
“Future uncertainties are viewed with less concern,” the analysts wrote in a statement. note.
“This reflects a broader expectation of more predictable market conditions.” In other words, traders see Bitcoin moving in a predictable pattern.
Ethereum
Similarly, Ethereum’s VRP fell from 18% to 8.5%. Although Ethereum’s VRP also plunged, it did not “collapse” like Bitcoin’s.
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The difference suggests investors are expecting relatively higher price swings for the world’s second-largest cryptocurrency, analysts said.
Indeed, an additional layer of uncertainty concerns the likelihood of approval from the United States Securities and Exchange Commission for Ethereum spot exchange traded funds. An SEC decision on ETFs is expected later this month.
The decision could have a more direct impact on Ethereum’s price, Bitfinex analysts said.
VRP
VRP is the difference between the implied volatility of options and the realized volatility of an underlying asset.
“Essentially, VRP quantifies the premium that investors demand as compensation” for additional risks related to future difficult markets, analysts write in a study. note.
Investors use VRP, typically calculated using options data, to calibrate their risk exposure.
What VRP means for pricing
Declines in VRP are indicative of expected market sentiment toward future price movements, but were not reflected in substantial price movements, “suggesting a stabilizing effect,” the analysts wrote.
Some analysts having theorized that because low volatility is linked to a greater propensity for traders to take risks, an environment with less market fluctuations tends to be accompanied by rising prices.
Sebastian Sinclair is markets correspondent for DL News. Do you have any advice? Contact Seb at sebastian@dlnews.com.