According to on-chain data provider Kaiko, Ethereum's implied volatility (IV) on near-term options contracts increased significantly over the past week. In this case, Deribit ETH options expiring on July 19 and 26 saw the most dramatic adjustments. Implied volatility for July 19 increased to 62% on Monday from 53% on Saturday, surpassing the longer-dated July 26 contract.
According to Kaiko, the inversion could indicate that traders were expecting a market event to occur, as Monday reports claimed spot ETH ETFs could begin next week.
Over the weekend $ETH implied volatility spiked on near term contracts. pic.twitter.com/GyHgSWkApH
— Kaiko (@KaikoData) July 16, 2024
The increase in implied volatility on the July 19 contract indicates that traders are willing to pay more to hedge current positions and guard against significant price movements in the short term.
This increase in near-term contracts' implied volatility may reflect a level of uncertainty among traders.
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Aside from an increase in implied volatility, liquidity conditions have remained stable, despite the customary dip in trading volumes during the summer months. Since the ETF was approved in May, ETH's 1% market depth has stayed stable at roughly $230 million. It had fallen below $200 million at the start of May but reversed its downward trend once the SEC approved spot ETFs.
The launch of spot ETFs should boost liquidity conditions for ETH, as it has for BTC since its inception in January.
Ethereum might outperform Bitcoin after ETF debut
The forthcoming launch of spot Ethereum exchange-traded funds may help the cryptocurrency continue to outperform larger rival Bitcoin, according to Kaiko.
The price of Ethereum compared to Bitcoin, reflected in the ETH vs. BTC pairing, increased to about 0.05 from 0.045, following the first stage of approval for Ether ETFs by the U.S. Securities and Exchange Commission.
Ethereum's price has, however, decreased by nearly 10% to $3,380. However, Kaiko claims that this does not tell the full story, and the improved ratio bodes well for the cryptocurrency's success once the ETFs begin trading.
At the time of writing, ETH was up 1.48% in the last 24 hours to $3,400 and up 11% weekly.
