A massive XRP derivatives play is betting its price won’t go anywhere before the end of June, even as macroeconomic headwinds and regulatory developments suggest a boom in volatility.
This move was broadcast on cryptocurrency exchange Deribit as a single block exchange, meaning it was a large transaction executed over-the-counter in a privately negotiated deal to prevent a drastic change in price.
The trade likely involved a whale or institution executing what is known as the “short straddle” strategy by selling short 1.5 million $1.40 call and put option contracts expiring in June. 26.
By selling both the call and the put, the trader effectively provides insurance against sharp price movements outside of the $1.40 strike price. The trader received an initial bonus of $224,500 for assuming this volatility risk.
The trader will keep this amount as profit if XRP stays near $1.40 until June 26.
The bet is therefore essentially on volatility to remain low, with prices set at close to $1.40. The payments-focused cryptocurrency has largely traded between $1.30 and $1.50 since February, according to CoinDesk data.
The strategy is not without risk. A sharp move in either direction would make the position unprofitable, forcing the trader to cover losses due to option buyers.
Right now, there are many factors pointing to the potential for volatility. Inflationary concerns in the United States and other parts of the world are driving up government bond yields around the world, discouraging investments in stocks, cryptocurrencies and other risky assets.
At the same time, the Senate Banking Committee advanced the Clarity Act, a landmark US legislative proposal designed to establish a clear regulatory framework for cryptocurrencies and digital assets. The bill will now be put to the Senate for a vote.
Stuart Alderoty, chief legal officer of Ripple, which uses
XRP is often considered an American crypto play, as Ripple is based in San Francisco and is one of several companies that received conditional approval from the Office of the Comptroller of the Currency (OCC) to create the Ripple National Trust Bank (RNTB).
