Grayscale research head Zach Pandl said Bitcoin’s volatility has fallen sharply as the asset has matured, while Zcash still carries much larger price swings. He said Bitcoin’s realized annualized volatility was about 125% in its early years, but averaged only around 40% over the past year, a level he said is now close to that of the U.S. "Magnificent Seven" stocks. By contrast, Zcash has a market capitalization of only about 1% of Bitcoin’s and ZEC averaged roughly 140% volatility over the past year. Based on current volatility, Pandl said a covered call strategy on Zcash would imply an annualized yield of about 70% from premium income, versus roughly 30% for a similar Bitcoin strategy. He also warned that the higher potential return comes with higher risk: if the spot price drops by more than the premium collected, a covered call position can still suffer principal losses. For investors seeking a more clearly defined risk-reward profile, he said long call or long put options may be worth considering.
Grayscale research head Zach Pandl said on Sept. 9 that Bitcoin’s price volatility has dropped noticeably as the asset has matured.
According to Pandl, Bitcoin’s realized annualized volatility was about 125% in its early years. Over the past year, that average was only around 40%, a level he said is now close to the U.S. "Magnificent Seven" stocks.
Zcash looks very different. Pandl said its market capitalization is only about 1% of Bitcoin’s, while ZEC price volatility averaged roughly 140% over the past year. Using current volatility as the basis, he said a covered call strategy on Zcash would imply an annualized yield of about 70% from option premium income. A comparable Bitcoin strategy would imply about 30%.
Pandl added that higher potential returns come with higher risk. If the spot price falls by more than the premium received, a covered call strategy can still produce principal losses. Investors who want a clearly defined risk-reward structure could consider buying call options or put options, he said.
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