As demand for downside protection in Bitcoin and Ethereum options rises, expectations for one-week volatility in both assets and the premiums on put options have increased.
As most crypto assets fell, the one-week volatility implied by Bitcoin options rose to 43% from around 33% on Thursday. The same measure for Ethereum climbed to 60% from 46%. Derivatives data cited by CoinDesk also shows that the additional premium paid for put options over call options has increased.
This spread rose from around 2% to 13% for Bitcoin and from 7% to 15% for Ethereum. CoinDesk links the move to a return of demand for downside protection as the market falls.
Open interest and funding shift in Ethereum
As Ethereum’s price fell 5.9%, its open interest dropped 6.7%. The funding rate also turned negative from Thursday’s positive level, meaning traders holding short positions are paying those in long positions.
Bitcoin’s price fell 2.2%, while open interest declined 0.2%. The funding rate remained positive but decreased compared with Thursday.
Downside positions also dominated options trading: four of Bitcoin’s six most active contracts were puts with strike prices between $70,000 and $72,000. Ethereum’s most active contract was a $1,900 put expiring in December.
Not investment advice.