Ether Volatility Surges Over 100% as Price Crashes

What to Know

• Ether’s one-day at-the-money volatility surged to 184% from 34%.
• Deribit’s ETH DVOL spiked above 100%.
• Market makers withdrawing liquidity amplified volatility.

Ether Volatility Explodes as Price Plummets

Ether (ETH), the second-largest cryptocurrency by market cap, saw extreme volatility early Monday as renewed trade war concerns triggered risk-off sentiment across global markets. ETH’s price dropped as much as 24%, creating major dislocations across centralized exchanges.

On Deribit, ether hit a low of $2,065, while Kraken and Coinbase saw lows of $2,127 and $2,150, respectively. The plunge marked the lowest ETH price since the August 5 crash.

Ether Put Options Surge as Volatility Index Spikes

Deribit’s ETH DVOL index, which measures expected price turbulence over the next four weeks, shot up to 101% from around 67%. Simultaneously, traders rushed to buy put options—contracts that allow them to sell ETH at a predetermined price—indicating a scramble for downside protection.

The put-call ratio, which compares demand for puts versus calls, jumped from last week’s relatively calm 0.6 to above 2.5, reflecting a sharp shift in market sentiment. Additionally, risk reversals—indicators of the implied volatility premium for calls versus puts—flashed negative values over 10%, signaling a strong bias for puts.

Market Makers Amplify Downside Pressure

The extreme price swings were worsened by market makers pulling liquidity—a common response during volatile trading conditions. Market makers play a crucial role in providing order book liquidity, but their risk-averse stance contributed to ETH’s sharp sell-off.

As volatility increased, some market makers exited the market, affecting options pricing. Additionally, delta hedging activities—where market makers adjust their positions to remain neutral—fueled further downside pressure. With ETH futures being sold at any available bid, the sell-off accelerated.

Trade War Concerns Fuel the Sell-Off

Beyond crypto-specific factors, broader macroeconomic fears also played a role. The renewed trade war between the U.S. and Canada, Mexico, and China stoked concerns about rising inflation, potentially limiting central banks’ ability to cut interest rates.

Traditional markets reacted sharply, with Dow futures dropping over 650 points and European stock futures sliding alongside a strengthening U.S. dollar. These developments contributed to the overall risk-off sentiment, pushing ETH and the broader crypto market lower.

Bottom Line

Ether’s extreme volatility highlights the fragility of crypto markets during macroeconomic uncertainty. A combination of liquidity issues, aggressive options positioning, and trade war fears contributed to the steep price drop. While volatility remains a hallmark of the crypto space, traders will be closely watching how ETH stabilizes in the coming days.