A massive XRP derivatives play is betting its price won’t go anywhere until the end of June, even as macro headwinds and regulatory developments suggest a surge in volatility.
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 from moving the price dramatically.
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 calls and puts expiring in June. 26.
By selling both the call and put options, the trader is effectively providing insurance against sharp price movements away from the $1.40 strike price. The trader received an initial premium of $224,500 for assuming this volatility risk.
The trader will retain that amount as profit if XRP stays near $1.40 until June 26.
Therefore, the bet is essentially on volatility remaining low, with prices set near $1.40. The payments-focused cryptocurrency has largely traded between $1.30 and $1.50 since February, according to data from CoinDesk.
The strategy is not without risks. A sharp move in either direction would make the position unprofitable, forcing the trader to cover losses owed to option buyers.
As of now, many factors point to possible volatility. Concerns about inflation in the US and other parts of the world are driving up government bond yields around the world, discouraging investments in stocks, cryptocurrencies and other risky assets.
Meanwhile, 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 now moves toward a full Senate vote.
Stuart Alderoty, chief legal officer of Ripple, which uses XRP to facilitate cross-border transactions, called the banking committee’s decision a “monumental result” and cited the protection of 67 million American cryptocurrency holders as the purpose of the bill.
XRP is often considered an American cryptocurrency, as Ripple is based in San Francisco and is among several companies that have received conditional approval from the Office of the Comptroller of the Currency (OCC) to establish the Ripple National Trust Bank (RNTB).
