Higher price swings coming in ether?

Options market shows implied volatility of ETH increasing relative to BTC

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February 11, 2020 Ether will face more volatility than bitcoin over the next six months, based on options pricing in recent weeks.  The spread between the six-month, at-the-money implied volatility for ether (ETH) and bitcoin (BTC) has increased to a six-month high of 22 percent, notes crypto-derivatives analytics firm Skew.  The recent spike in the ETH-BTC six-month implied volatility spread shows investors are expecting bigger percentage moves in ether (in either direction) than in bitcoin over the next 180 days.  The spread bottomed out at 4.7 percent at the end of October and has been on an upward trajectory ever since.  Interestingly, ether has consistently witnessed bigger percentage moves than bitcoin over the last 3.5 months, validating the uptick in the implied volatility spread.  While bitcoin dropped by 21 percent in the final two months of 2019, ether shed nearly 30 percent. This year it's a different story: Ether is reporting 73 percent gains on a year-to-date basis compared to bitcoin’s 37 percent gains.  Implied volatility is the market’s expectation of how risky an asset will be in the future. It is the standard deviation of returns traders are forecasting. Implied volatility is computed by taking an option and the underlying asset’s price. It also uses other inputs, such as time to expiration. One then back-solves for the missing variable - implied volatility in this case - using options pricing models such as Black-Scholes-Merton. Volatility has a positive impact on options price. The higher the volatility (uncertainty), the stronger the hedging demand is for both call (bullish bet) and put options (bearish bet).  Higher implied volatility suggests traders see a big bullish or bearish move in the offing. It's also often associated with bear markets, since investors face a higher risk of big losses.  The gauge has increased sharply from lows near 2.3 percent seen in early December, suggesting an increase in the risk inherent in ether relative to bitcoin.  That said, the average historical volatility spread over the last three years has been 29 percent, significantly higher than what was recently observed. Broader Trend Remains Bullish BTC: Price: $9,880 | Market cap: $179 billion | 24-Hr Volume: $34 billion Trend: Correction Bitcoin fell by 3.18 percent on Monday to register its second biggest daily loss of 2020. More importantly, the price drop engulfed Sunday's bullish marubozu candle, which marked 3.5-month highs near $10,200. A failed marubozu, a sign of strong bull sentiment, often paves the way for deeper price pullbacks. The cryptocurrency, therefore, risks revisiting former hurdle-turned-support levels located below $9,600. A violation there would expose the bullish higher low of $9,075 created on Feb. 4. A close below that level would invalidate the bullish trend. However, that looks unlikely as the weekly chart indicators are painting a bullish picture.  Also, the case for an extended correction would weaken if prices rise above $10,010, invalidating the lower highs setup on the hourly chart. That will likely allow the bulls to have another go at Sunday's high of $10,200. Read Analysis In this feature of the Markets Daily newsletter, we aggregate news, reports, ideas and tweets relevant to crypto traders and investors. Bitcoin Drops From $10,000 While Technicals Point to Pain Ahead​​​​​​​ (Bloomberg) Euphoria around Bitcoin’s break above $10,000 over the weekend appears to be short-lived, according to Bloomberg analysts. Litecoin Foundation Teams Up With Crypto Lender Cred for Loans Service (Decrypt) Litecoin holders can now earn up to 10 percent interest through Cred's crypto-lending platform. Inside Chainalysis’ Multimillion-Dollar Relationship With the US Government​​​​​​​ ​​​​(CoinDesk) Chainalysis has made $10 million in five years from the U.S. government, with nearly a dozen agencies and a military branch tapping the blockchain forensics firm. Why Trump Should Unveil A U.S. Answer To Bitcoin To Rival China’s Digital Yuan​​​​​​​​​​​​​​ (Forbes) The U.S. has said it will do whatever it takes to keep up with China on technology. There are growing calls from some quarters for a digital dollar to rival China's planned digital yuan.  Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. 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