Bitcoin and ether options implied volatility forecasts lackluster market in June: analysts

The current levels of implied volatility for bitcoin and ether options — a measure of expected future price movement — indicate that traders expect the market to be relatively calm over the coming weeks, analysts said.

"Implied volatility rank is 40 and implied volatility percentile is 52, both mid-level indicators which show the market is not expecting a lot of activity," Luuk Strijers told The Block.

Using the Deribit Volatility Index, which measures the market's expectation of future volatility for bitcoin over the next 30 days, the Block's Data Dashboard shows that implied volatility for bitcoin has dropped significantly since mid-May.

Options implied volatility point to sluggish market 

QCP Capital analysts observed the same indicators of a sluggish market, stating that "implied volatility has been absolutely crushed after the spot ether exchange-traded fund (ETF) approval in spite of prevailing catalysts."

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The U.S. Securities and Exchange Commission (SEC) approved spot ether ETFs on Thursday, May 23 — but, unlike bitcoin ETFs, which started trading the day after approval, the ether ETFs may not go live for a few weeks or months.

However, QCP Capital analysts added that "a sleepy market may get caught offside and our bet is on the bullish side, particularly for ether." They suggested a bullish ether move could occur if spot ether ETFs start trading earlier than expected in June.

Ether put-call ration skews bearish

Strijers added that there are derivatives indicators that show traders are purchasing puts in order to hedge against a potential downside in the asset's price over the coming weeks. "The put-call skew is negative as of mid-June indicating some bearish expectations for the next two weeks," he said.

The Block's Data Dashboard shows the put-call ratio for ether options rising since the middle of May across multiple derivatives exchanges. A rising put-call ratio is often considered bearish because it indicates that more traders are buying put options relative to call options. Put options are typically purchased when traders expect the price of an asset to decline, as they provide the right to sell the asset at a specified price.

The increased ether put-call ratio follows the approval, but not the launch, of spot ether exchange-traded funds by the U.S. Securities and Exchange Commission on May 23 — possibly suggesting that some traders are considering hedging strategies in preparation for potential downsides if the launch of these financial products on exchanges is delayed.