Options traders brace for ‘big July’ in Bitcoin and Ethereum after volatility drop in June, says Derive

Bitcoin and Ethereum implied volatility declined in June, prompting traders on onchain options venue Derive.xyz to position for a sharp breakout this month, head of research Sean Dawson told clients in the platform’s latest market note on Friday.

Bitcoin briefly dipped below $100,000 during military strikes in the Middle East on June 13 and 22, then rebounded to $107,000. Ether hovered around $2,600, except for a brief war scare drop to $2,200. Despite speculations of a nuclear conflict and the presumed start of World War III, the countries reached a ceasefire agreement, and markets steadied on the news.

The 30-day implied volatility trended downward, as BTC IV decreased to 36% from 44%, and ETH fell to 60% from 68%. Data suggests options traders were positioned for this outcome, Dawson noted. “Major drawdowns hit during key escalation points in the Middle East on June 13 and 22. But the limited volatility spikes tell us markets were betting on limited fallout,” he wrote. “That’s exactly what played out. The muted response in monthly volatility suggests traders correctly anticipated that hostilities would be contained.”

July outlook

Looking ahead, the options trading desk sees potential bullish price action for Bitcoin and Ether this month and possibly across the third quarter. However, the platform leans toward bigger moves for crypto’s second-largest asset.

Derive’s probability engine assigns only a 10% chance that Bitcoin will top $130,000 by the end of August, but traders have also clustered positions around that level. Roughly half of all open interest on the exchange expiring July 25 sits in $130,000 to $135,000 calls and $85,000 to $90,000 puts, reflecting equal conviction in a break higher or a hawkish-Fed slide to five-figure prices.

Thursday’s jobs report showed unemployment dropped to 4.1%, beating the 4.3% forecast and June’s 4.2%. The stronger labor data erased hopes for a dovish pivot at this month’s Federal Open Market Committee meeting. “While this is positive for equities and growth, it reduces the urgency for the Fed to cut rates. Market pricing now shows 23% odds of no rate cut before October, up from 6%,” Valentin Fournier, lead research analyst at BRN, told The Block.

The CME FedWatch tool, which tracks interest rate traders, told a similar story. There’s now a 95% chance the Fed will hold rates steady at this month’s session, up from around 65% after the previous meeting.

Yet, Ether’s skew on Derive tilts bullish. Nearly 80% of July call open interest stands above $3,000, and almost 30% of the target strikes are beyond $3,500. Robinhood’s plan to issue tokenized stocks and launch Layer 2 on Arbitrum could fuel a breakout supported by Ethereum’s real-world narrative, Dawson argues. “Traders are betting on a big July, with volatility suppressed and positioning split, all eyes are now on the Fed, macro data, and further geopolitical developments. ETH has the stronger momentum narrative, but BTC’s options market is coiled for a decisive move.”

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