While macro headwinds and regulatory developments point to a spike in volatility, massive investment in XRP derivatives is betting that its price will not see any change until the end of June.
The move was recorded as a single-block transaction on cryptocurrency exchange Deribit, meaning it was a large transaction executed off-exchange in a privately negotiated deal to prevent large price swings.
The trade likely involved whales or institutions executing a so-called “short straddle” strategy, which involves shorting (selling) 1.5 million $1.40 call and put contracts expiring in June. 26.
By selling calls and puts, traders are effectively providing insurance against a sharp deviation from the $1.40 strike price. The trader received an upfront payment of $224,500 for taking on this volatility risk.
If XRP remains near $1.40 by June 26, traders will keep that amount as profit.
Therefore, the bets are primarily on volatility remaining low and price anchoring around $1.40. The payments-focused cryptocurrency has essentially traded between $1.30 and $1.50 since February, according to CoinDesk.
This strategy is not without risks. A sharp move in either direction would render the position unprofitable, requiring the trader to absorb the option buyer’s losses.
So far, many factors point to the potential for volatility. Inflation concerns in the United States and other parts of the world are pushing up government bond yields around the world, discouraging investment in stocks, cryptocurrencies and other risky assets.
Meanwhile, the Senate Banking Committee introduced the Clarity Act, a landmark U.S. legislative proposal to establish a clear regulatory framework for cryptocurrencies and digital assets. The bill will now move to a vote in the full Senate.
Stuart Alderoty, chief legal officer of Ripple, which reportedly uses XRP to facilitate cross-border transactions, called the Banking Commission’s decision a “landmark achievement,” noting that the bill was intended to protect the 67 million U.S. cryptocurrency holders.
XRP is often considered the U.S. cryptocurrency as Ripple, headquartered in San Francisco, was one of several companies to receive conditional approval from the Office of the Comptroller of the Currency (OCC) to establish the Ripple National Trust Bank (RNTB).
