The efficient market theory states that prices fully reflect all available information. Consequently, market-implied metrics derived from options, such as the risk-neutral density, provide an accurate picture of the market's expectations. However, the realized price does not align perfectly in all cases, but the predictive power remains significant.

Ethereum price with its market-implied risk-neutral density

Here is an insightful comparison of Ethereum's actual market price with its market-implied risk-neutral density (RND) over six months. Ethereum's price has exhibited significant volatility, fluctuating between approximately $1,400 and $2,800, with spikes between March and April 2024.

🧮 Analyzing Market-Implied Risk Neutral Density

The risk-neutral density widens during periods of high volatility, reflecting increased uncertainty in the market. The market's implied expectations have generally aligned well with the realized prices. However, the bullish ETH price trend occasionally exceeded market expectations during spikes.

🎎 Value at Risk

The actual ETH price consistently stays above the 5% Value at Risk, demonstrating that extreme negative outcomes have been avoided.

The dynamics between realized market prices and market-implied expectations for ETH highlight the importance of options market data in understanding price volatility and risk assessment. Moreover, option-derived data can be a useful reference for assessing future ETH price movements.