This could signal that investors have given up expectations of a price decoupling, or they simply expect ETH price moves to mirror Bitcoin.
In the case of potential catalysts for significant price moves, implied volatility tends to move up whereas an absence of triggers causes volatility to recede, alongside a diminishing premium on options markets.
Deribit options implied volatility. Source: Skew
The above chart shows a continuous drop on both assets volatility, which can be partially explained by the Bitcoin halving in mid-May. At the time, investors had reasons to believe prices could oscillate more drastically as the possibility of various miner capitulations loomed.
At the same time, positive news from strong inflows by Grayscale Investments, advancements on the Ethereum 2.0 testnet, and a growing DeFi ecosystem boosted traders' expectations.
Crypto markets remain relatively volatile S&P 500 3-month volatility. Source: Federal Reserve
Volatility within the crypto market remains well above the level seen in the S&P 500 and that should be no surprise.
There are a handful of reasons behind this difference and some of the more notable ones are: the enormous untapped potential of digital assets and existing uncertainties related to the necessary evolution of various protocols.
Ether options markets point to bearish sentiment ETH options Put/Call ratios. Source: Skew
The above chart signals investors have been trading equal amounts of put and call ETH options. The indicator reached its highest level in one year, having been previously skewed to the call option (bullish) side.