Ether Hedging Activity Picks Up as U.S. ETF Debut Nears

Investors' focus on ether is evident from ETH's sustained volatility premium over BTC.

Investors are increasingly hedging their ether positions ahead of the debut of U.S.-based exchange-traded funds (ETFs) tracking ETH’s spot price, بازار مشتقات العملات المشفرة suggests.

Implied volatility (IV) – a measure of options-derived market expectations for price turbulence over a specific period – has risen across timeframes, نشان می دهد Deribit and Kaiko data. This signals increased demand for options or derivatives offering protection against price swings. A call protects against price rallies, while a put offers insurance against price slides.

The hedging activity has been more visible in shorter-term contracts, as indicated by the recent relative richness of implied volatility determined by options contracts expiring on July 19 compared to those expiring on July 26. According to Kaiko, the July 19 expiry IV rose from 53% on Saturday to 62% on Monday, exceeding the July 26 expiry IV.

"The increase in IV on the July 19 contract suggests traders are paying more to hedge existing positions and protect against sharp price moves in the short term. This spike in near-term contracts IV indicates a level of uncertainty among traders," analysts at Kaiko noted in Monday’s edition of their newsletter.

Traders also expect ether volatility to be higher compared to bitcoin. According to data from Amberdata, the spread between Deribit's 30-day ether and bitcoin implied volatility indices (BTC DVOL and ETH DVOL) has largely averaged around 10% since late May, up significantly from 5% in the first quarter.

Crypto exchange Bybit and analytics firm BlockScholes made a similar observation in a report shared with CoinDesk on Monday.

"Key findings indicate that investors are increasingly optimistic about ETH, particularly in anticipation of the first Ether Spot ETFs launching soon in the United States. This optimism is reflected in ETH's sustained volatility premium over BTC, which has persisted amid heightened market activity," the report noted.

The pickup in hedging activity in ether comes as traders are abuzz ahead of the launch of spot ether ETFs, which are expected to start trading next Tuesday. According to Gemini, spot ether ETFs could see a net inflow of $5 billion in the first six months, boosting ether's market value relative to bitcoin.

Moreover, traders, keeping in mind the "sell-the-fact" phenomenon that followed the debut of bitcoin ETFs on Jan. 11, might be bracing for similar price volatility in ether.

However, traders should note that the current market mood and ether's bullish positioning are far more muted compared to bitcoin in early January, suggesting a lower probability of a sell-the-fact pullback after the debut.

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team. He covers cryptocurrency markets and manages breaking news.