Ethereum’s recent Shapella upgrade may have stirred some concerns among investors, as the crypto options market is signaling a higher perceived risk of downside volatility in the smart contract blockchain’s native token, Ethereum (ETH), than market leader Bitcoin (BTC).
Todayq news recently reported that after the Shapella hard fork on Ethereum’s Beacon Chain, there was a surge in withdrawals, with over 1 million Ether (ETH) worth $2.1 billion being withdrawn within the first four days. The number of withdrawals exceeded earlier predictions, coming as a surprise to many in the Ethereum community. The withdrawals were made through 473,700 requests, and 87% of the active validators were able to withdraw their staked Ether. However, instead of being sold off, many validators re-staked their withdrawn Ether back onto the Beacon Chain to compound their interest.
According to options 25-delta risk reversal data tracked by crypto derivatives analytics firm Block Scholes, “ETH’s [risk reversal] skew has now reversed its post-Shapella recovery relative to BTC options, now pricing OTM puts at a 5 vol premium to calls at a 1-month tenor.”
This suggests a return to the slightly more negative sentiment assigned to ETH that we have commented on throughout this year
Andrew Melville, research analyst at Block Scholes.
The demand for puts in the Ether market was reportedly stronger than in the Bitcoin market, as Ether’s one-month bearish out-of-the-money (OTM) puts traded at a five volatility points premium to bullish OTM calls, while Bitcoin’s OTM puts traded at a three-point premium to calls.
It’s worth noting that risk reversals in both markets had recovered to almost zero from negative, signaling a bearish-to-neutral shift in sentiment after the Shapella hard fork went live on April 12.
This recent development could have some repercussions on the Ethereum network, as investors may become more cautious about holding Ethereum and opt for protective measures against potential price drops. However, it’s important to note that the cryptocurrency market is notoriously volatile and subject to rapid fluctuations, and any perceived risks may be mitigated by positive developments in the industry. It remains to be seen how this situation will develop, but it’s clear that investors are closely monitoring the situation and taking steps to protect their investments.