Ethereum’s volatility readings are outpacing Bitcoin, with the gap growing over the last few months as traders brace for impact ahead of the upcoming US election in November.
Implied volatility for 30-day at-the-money Ethereum contracts relative to Bitcoin has widened to almost 7%, Nick Forster, founder of DeFi derivatives protocol Derive, told Decrypt.
At-the-money refers to an option contract whose strike price is equal to or very close to the current market price of the underlying asset.
Both assets had nearly identical volatility levels at the start of November last year. With next month fast approaching, traders are positioning for volatility tied to a cloud hanging over the future of decentralized finance regulations in the US, the founder explained.
“Ethereum’s heightened volatility is a direct reflection of traders’ expectations for increased uncertainty, especially as we approach the election,” Forster said.
As the number two crypto by market capitalization, Ethereum is one of the industry’s largest platforms for smart contracts, essential for powering DeFi protocols and projects.
Notable spikes in forward volatility between October 25 and November 8 can be observed, with Ethereum's forward volatility at 76.6% and Bitcoin’s at 69.8%.
That means traders are expecting significant movement around this period, with Ethereum appearing more sensitive to external events, Forster said.
Bitcoin and Ethereum are also skewed roughly neutral, near zero, though Bitcoin is beginning to diverge slightly, indicating mild bullish sentiment for the world’s largest crypto.
“Bitcoin is entering a period of positive seasonal performance, often seeing gains in Q4 during bull cycles,” a spokesperson for digital assets market data outfit CryptoQuant told Decrypt. “With recovering demand and favorable seasonality, Bitcoin could target $85,000 to $100,000 in Q4.”
The timing could prove fruitful as several tailwinds, including the US political election, converge.
Attempting to sway voters, presidential candidates Vice President Kamala Harris and former President Donald Trump have courted industry participants in a bid to tip the odds in their favor.
Trump is seen by many within crypto as being more amenable to formulating policy designed to provide greater clarity for those operating within the sector.
His political rival, Harris, has also made inroads, speaking publicly on the issue for the first time last month, though language on future policy remains vague.
“Traders seem more confident in Bitcoin’s ability to weather these macro events,” Forster said.