Ether Volatility Explodes to Over 100% as Price Crashes

Ether Volatility Explodes to Over 100% as Price Crashes

Ether’s Volatility Surges Amid Price Crash as Traders Rush for Protection

Ether (ETH), the second-largest cryptocurrency by market value, saw a dramatic spike in volatility on Monday, driven by a sharp 24% drop in its price. This sell-off came amid rising concerns over a renewed trade war between the U.S. and its major trading partners, fueling risk aversion across global financial markets.

On platforms like Deribit, ether's price plunged to as low as $2,065, significantly below the $2,150 seen on Coinbase and Kraken, marking the steepest drop since August 5, 2024. This move triggered a surge in ether's one-day at-the-money (ATM) volatility, which jumped from 34% to 184%, as per data from Deribit and Presto Research.

The price drop also caused the Deribit DVOL index, which measures the expected price turbulence over the next four weeks, to climb to 101%, up from about 67%. Traders quickly turned to put options for downside protection, with the put-call ratio soaring from 0.6 to over 2.5, reflecting heightened demand for bearish positions.

Market makers contributed to the volatility by withdrawing liquidity amid the chaotic market conditions, further exacerbating price declines. This pullback was accompanied by a phenomenon known as delta hedging, where market makers adjusted their positions by selling into weakness, accelerating the sell-off.

The broader market downturn, including a 5?cline in Bitcoin (BTC) to $91,200, was attributed to fears of inflationary pressures caused by tariffs imposed by the U.S. on China, Mexico, and Canada. This renewed trade conflict is raising concerns about central banks' ability to cut interest rates, adding more pressure to risk-on assets like ether.

The pace of the ether sell-off has led some to speculate that a large fund or trader with substantial ETH-margined positions may have been liquidated, contributing to the exaggerated price slide. As the trade war fears continue to weigh on markets, both traditional and crypto, volatility is expected to remain high in the near term.