Compared with Bitcoin, will the risk of Ethereum be greater in the past six months?
This article comes fromYahoo！Finance, Original Author: Omkar Godbole
Odaily Translator |
This article comes from
, Original Author: Omkar Godbole
Odaily Translator |
If we look at how options have been priced in recent weeks, we may see greater volatility for Ethereum in the next six months — at least relative to Bitcoin.
Crypto derivatives analytics firm Skew noted that the difference between the six-month at-the-money option implied volatility on ethereum (ETH) and bitcoin (BTC) has risen to as high as 22 percentage points. In fact, the recent sharp spike in the ETH-BTC six-month at-the-money option implied volatility differential shows one thing: Investors are expecting large volatility in Ethereum over the next 180 days, meaning that the price of Ethereum will increase by more than Bitcoin, but at the same time the decline will also be greater than Bitcoin.
In the last two months of 2019, bitcoin fell 21 percent and ethereum fell nearly 30 percent. But when the time comes to 2020, the situation is completely different: Bitcoin has gained 37% year-to-date, but Ethereum has achieved a staggering 73% gain in the same period.
Implied volatility is an evaluation indicator of the market's future risk expectations of assets. It substitutes the transaction price of options or warrants in the market into the theoretical price model of warrants—the volatility value deduced from the Black-Scholes model. Since the option pricing model (such as the BS model) gives the quantitative relationship between the option price and five basic parameters (underlying stock price, execution price, interest rate, expiration time, and volatility), as long as the first four basic parameters and The actual market price of the option is substituted into the pricing formula as a known quantity, and the only unknown quantity can be solved from it, and its size is the implied volatility.
Implied volatility has a positive impact on option prices, and the higher the volatility (uncertainty), the greater the need for hedging with calls (bullish bets) and puts (bearish bets). However, it should be noted that implied volatility is not an indicator for evaluating the direction of market development. In layman’s terms, you cannot use this indicator to judge whether the market will develop in the direction of a bull market or a bear market. Larger increase or decrease trend. However, since traders typically associate increased volatility with bear markets, implied volatility is more of a "risk" indicator for most investors.
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Compared to Bitcoin, Ethereum is Relatively Less Dangerous than It Used to be
Realized volatility and historical volatility are two metrics that reflect the standard deviation from the average price of the underlying asset, usually expressed as a percentage. If the historical volatility of an asset is higher, its risk is relatively greater.
The ETH-BTC six-month realized volatility differential rose by 13 percentage points during the week of February 3, reaching its highest level since July 13, 2019. From a low of nearly 2.3 percent in early December 2019, the metric has now risen sharply, illustrating the increased risk inherent in Ethereum compared to Bitcoin.
If we analyze the historical volatility data, we find that the average historical volatility of Ethereum over the past three years is 29 percentage points, which is much higher than the level observed recently-this also seems to indicate that although the recent "risk" is higher than that of Bitcoin, If the time is extended, Ethereum will still relatively reduce its risk to a level close to that of Bitcoin.
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Volatility and mean reversion
