How Does High Volatility in a Cryptocurrency like Ethereum Impact the Time Value of an ATM Option?

High volatility significantly increases the time value (extrinsic value) of an ATM option. Volatility is a measure of the expected price fluctuation of the underlying asset.

Higher expected volatility means there is a greater probability that the ATM option will move significantly into the money before expiration. Since the ATM option has no intrinsic value, its entire premium rises sharply to reflect this increased probability.