Something unusual is happening in the crypto world, and it feels a bit like that classic old body-swap movie trope: ether is suddenly less volatile than bitcoin – both on an implied, forward-looking basis and on a realized, historical basis. The T3 Ether Volatility Index – a measure of implied 30-day swings in the price of Ethereum’s coin, derived from options prices – is trailing a comparable gauge for bitcoin by a margin not seen since at least 2021. That's unusual because ether and alternative cryptocurrencies generally tend to be more volatile than bitcoin.

At the same time, the difference between the 180-day realized volatility (or historical volatility) of ether and bitcoin is at its smallest since 2020.

What’s driving the trend?

Some investors point to ether’s staking yield, which has been increasing this year and is now in an attractive spot: high-single-digits. A higher yield could suppress volatility as it encourages more traders to “stake” their ether. (Staking is when users lock up their existing coins for a fixed period to help operate the blockchain network and earn rewards). Bitcoin’s blockchain, meanwhile, has recently been roiled by an explosion of NFTs (something that used to be chiefly Ethereum’s domain) and meme coins after an upgrade allowed the two to be deployed on the network for the first time.

Why should you care?

Well, according to some prominent crypto watchers, ether’s relatively tame behavior could spell good news for the world’s second-biggest cryptocurrency by attracting more long-term investors. That’s because lower volatility typically encourages big institutional investors to allocate more capital to the crypto, by making it cheaper to buy protection on it via options contracts and making it easier to manage overall risk exposures. Time will tell whether these dynamics prove to be the catalyst that pushes ether to break out above $2,000…