A massive XRP derivatives play is betting the price won’t go anywhere until late June, even as macro headwinds and regulatory developments suggest a volatility boom.
The move hit the tape on crypto exchange Deribit as a single-block trade, meaning it was a large transaction carried out over-the-counter in a privately negotiated deal to prevent it from moving the price drastically.
The trade likely involved a whale or institution executing what is known as the “short straddle” strategy by shorting (selling) 1.5 million contracts of both $1.40 call and put options expiring in June. 26.
By selling both the call and the put, the trader effectively provides insurance against sharp price moves away from the $1.40 strike. The trader received an upfront premium of $224,500 for assuming this volatility risk.
The trader will keep this amount as profit if XRP stays close to $1.40 through June 26.
Therefore, the bet is mainly on volatility to remain low, with prices pegged near $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 and require the trader to cover losses due to option buyers.
Right now, plenty of factors point to the potential for volatility. Inflation worries in the US and other parts of the world are pushing up government bond yields worldwide and discouraging investment in stocks, cryptocurrencies and other risky assets.
Meanwhile, the Senate Banking Committee advanced the Clarity Act, a landmark US bill designed to establish a clear regulatory framework for cryptocurrencies and digital assets. The bill now moves on to a full Senate vote.
Stuart Alderoty, general counsel at Ripple, which uses XRP to facilitate cross-border transactions, reportedly called the banking committee’s decision a “monumental result” and cited the protection of 67 million US crypto holders as the bill’s purpose.
XRP is often seen as an American crypto play, as Ripple is based in San Francisco and is among several firms that have received conditional approval from the Office of the Comptroller of the Currency (OCC) to establish the Ripple National Trust Bank (RNTB).
