The crypto market often goes on roller-coaster rides. During these cycles, Bitcoin, being the largest cryptocurrency in the world, has been able to drive pumps and dumps in the altcoin market time and again. While, historically, there might not have been much price volatility between Ethereum and Bitcoin, but there could be signs of reversal in this trend.
At least, that is what the options market traders were anticipating. The spread between the three-month at-the-money [ATM] implied volatility [IV] for Ethereum and Bitcoin was observed to be nearing its all-time high. This was noted by the crypto-analytic firm, Skew.
The recent surge in the 3-month implied volatility spread could potentially imply that the investors were in anticipation of a sharp price movement [which could be on either side] in Ethereum than in Bitcoin over the next three months.
In the first quarter of the year, Ethereum saw massive spikes even as Bitcoin’s price remained dull, something that was speculated to be stimulated by the upcoming launch of Ethereum 2.0. However, as the release remained pretty much a moving target, the implied volatility spread dropped to the negative side.
The latest rise in ETH-BTC IV spread, however, has reignited a positive sentiment among the options market traders, since high volatility translates to a positive impact on options price. And while implied volatility does not determine the direction of the price change, what it does indicate, however, was that a big bullish or bearish outcome could materialize in the coming months. This is primarily due to the fact that there is a strong hedging demand for both put and call options at a time of high volatility.
Ethereum congestion and 2.0’s testnet crash
Ethereum network has been plagued with severe congestion issues which resulted in its Gas fee skyrocketing. Besides, Ethereum 2.0’s Medalla testnet recently crashed due to a bug in Prysm’s third-party web infrastructure provider, Cloudflare.
Moreover, Ethereum Co-founder, Vitalik Buterin openly admitted in a recent podcast that Ethereum 2.0 is much harder to implement from a technical perspective than they had previously expected.
Despite the growing concerns, many in the community were bullish on Ethereum’s long-term price action. CEO of BitMEX, Arthur Hayes is the latest one to comment on one such positive predictions for the second-largest cryptocurrency.
After Ethereum breached the crucial level of $400, Hayes tweeted that the coin’s price coils reach “soon” $500. This tweet comes days after the exec revealed that he was “farmer” and shared YAM token earnings after staking Compound protocol’s token, COMP.