Ether Volatility Surges Past 100% as Trade War Fears Trigger Market Turmoil

Ether (ETH) experienced a dramatic increase in volatility early Monday, with its DVOL index spiking above 100% as traders scrambled for downside protection amid a global sell-off triggered by escalating trade tensions between the U.S. and its key partners.

The cryptocurrency plunged as much as 24%, with significant price discrepancies across major exchanges. On Deribit, ETH hit a low of $2,065, while Kraken and Coinbase recorded lows of $2,127 and $2,150, respectively. According to TradingView and CoinDesk data, this marked Ether’s most severe drop since August 2021. Meanwhile, CryptoQuant reported that the decline was the biggest since May 2021.

Over the past three days, ETH has fallen by 23%, its worst stretch since November 2022. Bitcoin (BTC) also declined but saw a more modest drop of just over 5%, reaching $91,200.

Options Market Reacts as Put Demand Soars

As ETH’s price tumbled, options traders rushed to hedge their positions, causing its one-day at-the-money volatility to surge from 34% to 184%. Data from Presto Research also revealed that Deribit’s Ether DVOL index, which gauges expected price swings over the next month, climbed from 67% to 101%.

“The sharp sell-off caused a surge in demand for downside protection, leading to a significant rise in the put-call ratio from 0.6 last week to over 2.5 today,” said Rick Maeda, an analyst at Presto Research. Risk reversals, which measure the volatility premium for calls versus puts, turned deeply negative, exceeding -10%, highlighting the strong preference for puts.

Market Makers Add to Volatility

Liquidity crunches played a role in amplifying Ether’s losses. Griffin Ardern, head of options trading at BloFin, noted that some market makers withdrew liquidity in response to high volatility, reducing order book depth and worsening price swings.

Markus Thielen, head of research at 10x Research, explained that market makers’ need to hedge their positions contributed to the rapid decline. “As market makers attempted to delta hedge their books, they sold aggressively into the drop, further accelerating the downside move,” Thielen stated.

Trade War Concerns Weigh on Crypto and Traditional Markets

The broader crypto downturn is being attributed to renewed trade war fears, with the U.S. imposing fresh tariffs on Canada, Mexico, and China. The potential economic fallout has raised inflation concerns, making it harder for central banks to cut interest rates and support economic growth.

Traditional markets also took a hit, with Dow futures sliding more than 650 points and European stock futures following suit. Meanwhile, the U.S. dollar strengthened as investors sought safer assets.

As geopolitical uncertainty continues to weigh on markets, traders are bracing for further turbulence, with Ether’s recent volatility spike signaling the potential for more wild price swings ahead.