What to know : A large trader booked a "short strangle" strategy on Deribit, expecting XRP to stay close to $1.40 till the end of June. The trader collected about $224,500 in premiums and will keep the full amount if XRP remains close to $1.40. The low-volatility wager comes as macroeconomic pressures and a key U.S. crypto regulatory bill, the Clarity Act, raise the prospect of bigger price swings.
A massive XRP derivatives play is betting that its price goes nowhere until the end of 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 executed over-the-counter in a privately negotiated deal to prevent it drastically moving the price.
The trade likely involved a whale or an institution executing what is known as the "short straddle" strategy by shorting (selling) 1.5 million contracts of both the $1.40 call and put options expiring on June. 26.
By selling both the call and put, the trader is effectively providing insurance against sharp price movements away from the $1.40 strike. The trader received an upfront premium of $224,500 for assuming this volatility risk.
The trader will retain that amount as profit if XRP remains near $1.40 through June 26.
Hence, the bet is essentially on volatility to stay low, with prices pinned 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 turn the position unprofitable, requiring the trader to cover losses owed to option buyers.
As of now, plenty of factors point to potential for volatility. Inflation concerns in the U.S. and other parts of the world are pushing up government bond yields worldwide, disincentivizing investments in stocks, cryptocurrencies and other risky assets.
Meanwhile, the Senate Banking Committee advanced the Clarity Act, a landmark U.S. legislative proposal designed to establish a clear regulatory framework for cryptocurrencies and digital assets. The bill now moves forward to a full Senate vote.
Stuart Alderoty, chief legal officer at Ripple, which uses XRP to facilitate cross-border transactions, reportedly called the banking committee's decision a "monumental outcome" and cited the protection of 67 million American crypto holders as the bill's purpose.
XRP is often seen as a U.S. 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).
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