The crypto options market has signaled that two weeks after Etheruem’s Shapella update the market perceives a greater risk of volatility on the downside for the native token of the blockchain smart contracts, ether (ETH), as compared to the market leader bitcoin (BTC).

Options tied to bitcoin and ether on Tuesday showed a preference for puts or bearish bets, which offer protection against price drops. The demand for puts on the ether market, however, was higher than the demand in the bitcoin markets.

According to data from Block Scholes’ crypto derivatives analytics company, , the 25-delta risk reversal, ether’s bearish one-month out-of-the money (OTM), puts traded for five points more than bullish OTM, while bitcoin’s OTM, puts, traded at a premium of three points over calls.

Andrew Melville wrote on Tuesday that “ETH’s (risk reversal) skew had reversed relative to BTC its recovery post-Shapella, and now prices OTM puts at a 5-vol premium to calls with a 1-month tenor.”

Melville said, “This indicates a return of the slightly negative sentiment that we have expressed about ETH throughout this year.”

Investors’ expectations of price volatility over a certain period are referred to as implied volatility. A rise in implied volatility indicates a surge in the demand for options, which in turn increases premiums.

Risk reversals are based on the difference between implied volatility of OTM calls and puts. This tells observers which direction volatility will be more likely. The option is OTM if the market price of the underlying asset is lower than the strike price in the case bullish calls or higher in the bearish put case.

The yellow line is the bitcoin gauge, while the blue line is ETH’s risk reversal over a one-month period. (Block Scholes) (Block Scholes)

Except for the post-Shapella-week, ether’s risk reversal over a month has consistently been below bitcoin’s risk reversal. This indicates a relative bias towards puts.

After the Shapella fork, which went live on 12 April, risk reversals had almost recovered to zero. This signaled a shift from a negative to a neutral sentiment.

After the upgrade, ether could be withdrawn from the network and rewards credited. This de-risked the popular passive investment strategy of depositing coins into the network for rewards. Ether reached a high of $2,140 in 11 months following the upgrade, but has since fallen to less than $1,900.

Parikshit Miishra is the editor.