Crypto News- Despite a tumultuous start to the month, traders in the options market are now betting on a smoother ride ahead for Bitcoin and Ethereum.
Bitcoin Halving Fears Subside as Market Stability Takes Hold: Price Outlook
According to analysts at Bitfinex, who use the volatility risk premium as a market gauge, significant changes have been observed in the two leading cryptocurrencies.
For Bitcoin, the premium has plummeted from 15% on April 30 to just 2.5%, indicating that investors anticipate lower volatility in the near future.
Bitcoin’s Resilience: Overcoming External Pressures to Rebound Strong
This shift in sentiment marks a stark reversal after recent concerns such as Federal Reserve policy and Middle East tensions contributed to Bitcoin’s drop to a two-month low of $56,800.
However, fears related to last month’s Bitcoin halving have subsided, leading some to predict a price surge to as high as $180,000 by the end of the year.
“Future uncertainties are viewed with less apprehension,” noted the analysts, suggesting a broader expectation of more stable market conditions and a predictable trajectory for Bitcoin.
Similarly, Ethereum’s volatility risk premium has fallen from 18% to 8.5%. While Ethereum’s premium also dropped, it did not experience the same drastic decline as Bitcoin.
Ethereum Price Swings: SEC’s ETF Decision Looms Over Market Sentiment
This difference implies that investors foresee relatively higher price fluctuations for Ethereum, possibly due to additional uncertainty surrounding the potential approval of spot Ethereum exchange-traded funds (ETFs) by the US Securities and Exchange Commission (SEC). A decision on the ETFs is expected later this month and could directly impact Ethereum’s price.
Understanding the Volatility Risk Premium (VRP)
The volatility risk premium (VRP) is essentially the difference between options’ implied volatility and an underlying asset’s realised volatility. It quantifies the premium that investors demand as compensation for the additional risks associated with volatile markets ahead.
“Declines in VRP indicate expected market sentiment towards future price fluctuations, but have not been reflected in significant price movements, suggesting a stabilisation effect,” the analysts explained.
Some analysts have theorised that low volatility, which is associated with traders’ greater willingness to take on risk, often coincides with rising prices due to a more favorable trading environment.
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