Derive Predictions Update: April 15th 2025

Derive.xyz Market Insights: Volatility to surge as Trump’s trade war continues

April 15, 2025 by Dr. Sean Dawson

Markets are set to remain turbulent in the weeks ahead as Trump's trade war continues to escalate. While the 90-day reprieve on tariffs offered some temporary relief, ongoing tensions between the US and China point to more volatility ahead.

The market has already begun reacting to this uncertainty, with significant spikes in volatility across the board. For example, Ethereum’s 7-day implied volatility (red line) surged to 120%, and the 30-day IV rose to 80% earlier this month. These levels have since calmed, but with the unpredictable nature of Trump's actions, we anticipate further volatility spikes in the near future. 

Source: Derive.xyz, Amberdata

Similarly, Bitcoin’s volatility saw increases of 80% and 60% for the respective timeframes.

Source: Derive.xyz, Amberdata

Given that the trade war is showing no signs of de-escalating – especially considering the ongoing tensions surrounding tech imports from China – volatility levels may rise sharply in the upcoming week. 

We've also seen realized volatility consistently higher than implied volatility, particularly for Bitcoin. For example, implied volatility for 7-day BTC options has been around 50%, while realized volatility has been 70%. This means option buyers are currently purchasing volatility at a discounted price, allowing them to benefit from options without paying the full premium.

As the market faces heightened uncertainty, traders are seeking downside protection, and the demand for puts remains high. This manifests in the options market as a negative skew, where the implied volatility of puts exceeds that of calls. Currently, the skew for Bitcoin is around -4%, indicating increased demand for downside protection (red 7 day and blue 30 day).

Source: Derive.xyz, Amberdata

With volatility expected to remain elevated, puts will continue to trade at a premium, making this a crucial time for traders to consider their positions and hedge accordingly.