The downward trend in Deribit’s forward-looking ether volatilty index (ETHDVOL) is continuing amid macroeconomic uncertainty and the pepecoin frenzy (PEPE), which has increased demand on the Ethereum network.

Amberdata, a provider of digital assets data, reported that the DVOL Index (which calculates ether’s annualized 30 day implied volatility, or expectations for price turbulence in the next four week) fell to a new record low at 51 during the weekend. Deribit’s order book for options is used to calculate implied volatility.

The index has fallen since the collapse of FTX in early November. Nearly four weeks have passed since Ethereum introduced Shanghai’s long-awaited upgrade, derisking and the passive investing strategy that rewards those who stake coins on the Ethereum network.

Bitcoin’s DVOL is down from 74 in recent months to 51, but it remains above its lifetime low of 41.95 set in January. Deribit which is responsible for almost 90% of global crypto options trading, launched the bitcoin DVOL and ether DVOL indices early in 2021.

Implied volatility is said to be positively correlated with the demand for options, a hedging instrument. It is also said to represent fear or uncertainty on the market.

There is a lot of uncertainty around at the moment, thanks to the U.S. The debt ceiling and banking crisis are causing concern. The surprising strong U.S. job report on Friday raised bets the Federal Reserve’s cycle of tightening was over. The U.S. April inflation data, which is a key market indicator, will be released this week.

Greg Magadini is the director of derivatives for Amberdata. He said this in a newsletter, pointing out that ETH and BTC DVOL indices are unusually low.

Other words, the major cryptos are currently underpriced in anticipation of wild price swings.

Magadini says that volatility expectations on the ether market may be more underpriced compared to the bitcoin market. Now is the right time to “buy ETH Volatility [buy ETH Volatility]”.

The relative volatility can be calculated by dividing ETH-DVOL by BTC DVOL. “It’s basically at an all-time high,” Magadini said.

A CRASH with a high level of risk would hurt ETH spot price a lot because it is an Altcoin. Altcoins would outperform if the crypto bull market was to resume. In that “traditional” scenario of a crypto bull, Magadini said ETH would outperform BTC.

Traders usually buy options, such as call or put or both, or volatility futures to take advantage of an anticipated surge in volatility. Deribit introduced BTC/DVOL futures at the end of March.

Parikshit Miishra is the editor.