Despite a wave of bullish developments surrounding XRP, options traders on Deribit are pricing in caution.According to data from Kaiko, the implied volatility (IV) smile for XRP options expiring on Friday, April 18, is heavily skewed to the left. This indicates elevated demand for downside protection.Notably, the skew suggests that investors are purchasing out-of-the-money (OTM) puts, especially at strike prices around $1.5, where implied volatility reaches as high as 160%. In contrast, the IV curve for later expiries like May 30 is more balanced. This indicates that bearish sentiment is likely concentrated around near-term regulatory events.Chart of XRP implied volatility by KaikoSpot ETF Decision Looms Over Market SentimentFor context, a major catalyst driving this caution is the SECs upcoming response to Grayscales application for a spot XRP ETF. The agency must issue a decision by May 22, a deadline that falls just weeks after the April options expiry. Traders may be positioning themselves defensively in case of a delay or denial from the SEC, despite recent positive signals.Notably, Teucrium recently launched a 2x leveraged XRP ETF, which some analysts say could undermine any argument the SEC might use to reject a standard spot ETF. If the SEC is comfortable approving a riskier leveraged product, it may also face legal and public pressure to greenlight a spot version.For context, Grayscales previous legal battle played a key role in approving Bitcoin spot ETFs, exposing contradictions in the SECs stance. The agency had already approved a Bitcoin futures ETF based on CME futures, which closely track spot prices with over 99% correlation. This forced the SEC to acknowledge its own inconsistency and approve a spot ETF.Meanwhile, XRPs situation is different. It lacks a robust futures market, and much of its trading occurs overseas. Still, its presence on U.S. spot exchanges has recently climbed to the highest level since the SECs 2020 lawsuit triggered widespread delistings. On the other hand, Solana experienced a steady decline in U.S. market share, dropping to 16%, down from the 2530% range it maintained for much of 2022.Fundamentals Strengthen XRPs CaseBeyond ETF speculation, XRPs underlying market fundamentals have improved significantly. It now leads in U.S. spot market depth among altcoins, outperforming competitors like Solana and Cardano. Liquidity has surged, and the tokens share of global trading volume continues to rise.This uptick in structural strength comes amid a shift at the top of the SEC. With Paul Atkins assuming leadership following Chair Gary Genslers exit, the regulatory climate could turn more favorable toward crypto. Atkins is known for being more market-friendly, which may positively influence future ETF decisions.
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