Ether Volatility Now Highest in Six Months Compared With Bitcoin’s

Investors are pricing more volatility in ether compared to bitcoin. It's yet another consequence of this year's boom in decentralized finance, or DeFi.

AccessTimeIconAug 24, 2020 at 3:12 p.m. UTC
Updated Sep 14, 2021 at 9:47 a.m. UTC
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Investors are expecting more volatility in ether (ETH) compared with bitcoin (BTC), according to a key metric, with the measure of risk at a six-month high amid a boom in decentralized finance (DeFi).

  • The three-month spread between ether's volatility and bitcoin's has risen to 29%, the highest level since Feb. 23, according to data source Skew.
  • The metric, which tracks the difference in implied volatility for at-the-money options in both cryptocurrencies, has risen from -2.4% to 29% in two months. 
  • Implied volatility is calculated from options prices and shows the market's opinion of the underlying asset’s potential moves. It is often considered a proxy of market risk.
'Potential big move' - but not necessarily up
  • The surge in the volatility spread suggests investors are pricing bigger percentage moves in ether than bitcoin over the next quarter.
  • “Investors are focused on DeFi and mindful of a potential big move in ETH," said Skew's CEO Emmanuel Goh. 
  • Implied volatility does not tell us anything about the direction of the next big move.
  • As such, traders are warned against interpreting the rise in ether-bitcoin volatility spread as a bullish price signal.
  • Ether has witnessed greater price volatility over the past four weeks. The three-month ether-bitcoin realized volatility spread bottomed out at 5.7% on July 20 and was last seen at 19%, the highest level since June 11.
  • Realized or historical price volatility is a measure of daily price movements that have already happened. Implied volatility is what the market expects for the future.
  • Bitcoin’s price is up 64% on a year-to-date basis, while ether has gained over 200%, according to data source CoinDesk 20.
  • The total value locked in DeFi platforms is now closing on the $7 billion mark – up 10% on a year-to-date basis, as per data provided by defipulse.com. Most decentralized applications are based on ethereum’s blockchain.
  • Ether’s average transaction costs reached record highs above $6 earlier this month, signaling network congestion.

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