Derive Predictions Update: February 7th 2025

Derive.xyz Predictions Update: Crypto Market Sees $2.3B in Liquidations, ETH IV Spikes Amid 18% Price Drop

January 4, 2025, Dr. Sean Dawson, Head of Research, Derive.xyz

In the last 24 hours, crypto markets saw a staggering $2.3 billion in liquidations, with over $600 million of that coming from ETH and its derivatives.

ETH’s price dropped by 18%, which caused a huge spike in market volatility. This means there was a lot of uncertainty in the market, with traders buying both types of options (puts and calls) to either protect themselves from further losses or to take advantage of a potential price rebound.

ETH’s 1-day implied volatility (a measure of price fluctuation expectations) surged from 60% to 145% before settling at 88%. Similarly, its 7-day volatility jumped from 66% to 122%, and is now around 75%. This indicates that traders expect larger and more unpredictable price movements in the short term, especially following the sharp drop in ETH’s price, which has increased uncertainty in the market.

Bitcoin also saw a rise in volatility, with its 1-day implied volatility increasing from 43% to 88%, but its 7-day volatility remained fairly steady, only moving from 50% to 54%.

Market Sentiment Shift

The chance of ETH settling below $2K by March 28 has increased from 4% to 10% in the last 24 hours as bearish sentiment takes hold.

The chance of ETH reaching over $4K by March 28 has more than halved, dropping from 15% to 7%.

For BTC, the likelihood of a sub-$80K price by March 28 has remained steady at around 12%.

Contract Activity

BTC contracts on Derive.xyz showed no significant sentiment shift, with trades evenly split between calls and puts.

In contrast, ETH’s contracts saw 52.3% calls bought, indicating traders are looking for leverage and expecting a potential bounce.

Predictions

It’s unlikely that ETH will dip below $2.2K. Despite the ongoing trade tensions, there’s potential for a recovery, especially as President Trump paused tariffs and engages in talks with Canada, China and Mexico.

Trump's Executive Order to establish a sovereign wealth fund under the Treasury and Commerce departments could signal bullish sentiment for the digital asset space. This is particularly relevant as Commerce Secretary nominee Howard Lutnick has been a strong advocate for the industry.