XRP investors are monitoring a notable trend as protection against downturns in XRP-linked exchange-traded funds (ETFs) becomes increasingly expensive, mirroring past crypto market corrections.

On Monday, the cost of insuring against losses in BlackRock’s iShares Bitcoin Trust ETF (IBIT) surged to its highest level since the sharp April market decline. Although not directly related to XRP, the pattern signals a broader risk-aversion mood across major crypto assets, potentially impacting XRP ETF sentiment in the near term.

Rising Demand for Downside Insurance

According to Market Chameleon, the volatility skew between 25-delta put and call options for IBIT expanded to 4.4 on Monday — the widest since April 10. This skew quantifies the premium investors are willing to pay for put options, revealing a heightened appetite for downside protection.

Put options, which offer protection in declining markets, are trading at a sizable implied volatility (IV) premium to call options. Such disparities typically indicate that investors are concerned about potential market drops, prompting them to hedge their positions in case of a downturn.

Price Pressures Affect ETF Sentiment

The iShares Bitcoin Trust ETF opened significantly lower at $65.72 on Monday, following Bitcoin’s overnight weakness. By midday, the ETF was trading at $65.44, down 1.51% for the session. This pullback follows a new all-time high of $69.89 the previous week, according to TradingView data.

While these figures directly reference Bitcoin, XRP investors should take note. Similar ETF instruments for XRP may soon experience parallel increases in hedging costs if broader crypto volatility persists. Market trends such as the current shift in trader sentiment could ripple out and affect secondary crypto ETFs.

This chart highlights the spike in option skew, suggesting increased bearish sentiment.

Investor Behavior Reflects Heightened Caution

Major market players often use options to either hedge against short-term downside or express directional views. As the IV skew increases, traders show a growing concern over holding long positions unhedged. This trend reflects a broader caution in the crypto market, particularly among institutions exposed to digital asset ETFs like IBIT — and potentially future XRP-based instruments.

The rising premium on downside protection indicates that even after a strong performance last week, a sense of uncertainty looms. XRP investors, especially those holding positions in similar ETF products or waiting for SEC approvals, might interpret this as a signal to reassess short-term risks.

Broader Implications for XRP ETF Products

Even though the current data stems from IBIT and focuses on Bitcoin, similar demand patterns for insurance could emerge if XRP ETF products gain traction. As traders draw parallels between top crypto ETFs, the cost of hedging could serve as a forward-looking gauge of sentiment across the digital asset landscape.

Related: XRP Price: $12M Max Pain for Bears

For now, XRP and other altcoins remain susceptible to broader industry sentiment, particularly as regulatory developments and market dynamics evolve rapidly in the ETF space.