Ethereum (ETH) Volatility Is Mispriced, Pointing To Explosive Moves Ahead: On-Chain Report

Arman Shirinyan

Ethereum Implied Volatility Pointing Down to Explosive Moves Ahead


What does implied volatility (IV) tell?Ethereum volatility at the lower bound

The implied volatility of the second largest cryptocurrency on the market has been heavily mispriced by ., according to historical data skewAnalytics

What does implied volatility (IV) tell?

The asset’s implied volatility is often used to determine when the asset is targeting an explosive or highly volatile move. In traditional financial markets, IV is used when trading options for price contracts where high volatility results in higher contract premiums and vice versa.

Source: messari

The statistic itself is purely based on technical data and does not rely on any kind of fundamentals. Since it’s relying purely on price action, it can help to see the uncertainty and determine the sentiment for a short term.

Ethereum volatility at the lower bound

As the data suggests, Ethereum’s volatility is currently minimal according to historical data. The implied volatility from October 2020 to today stands at 74%, with a minimum of 70% and a maximum of 175%.

In addition to extremely low volatility, the Ethereum/Bitcoin volatility spread against the ETHBTC trading pair is negative, which is a strong volatility spike signal. By analogy with moving averages, a large volatility spread with Bitcoin has historically led to volatile moves in the market.

Prior to the March pump, in which Ethereum and Bitcoin prices rose 40% and 27% respectively, the volatility spread for both assets was at its highest level in history as volatility fell significantly, showing that the market in fear remains and uncertainty.

At the time of writing, Ethereum is trading at $3,516 with almost no price changes in the past 24 hours.

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