Bitcoin volatility expected to plummet after price fails to breach $25,000

This time last week, Bitcoin looked like it was about to break out of a significant short-term bullish breakout. The world’s largest cryptocurrency by market capitalization has formed a short-term ascending triangle pattern and looks set to breach the key $25,200-$25,400 area, opening the door for a faster rally to the next major resistance area around $28,000.


Source: Tradingview

However, macro data (strong U.S. monthly data and a belligerent Fed statement pushed bond yields higher as well as the dollar higher and U.S. stocks lower), combined with regulatory concerns over a widening crackdown on cryptocurrencies, kept bulls on the back foot. Bitcoin fell about 3 percent last week and another 1.5 percent this week.

Bitcoin is currently trading at a low of $23,700, between $21,400-25,300 in February. Traders/investors appear to be betting that the range-bound conditions will continue for some time. At least, that’s the message the bitcoin options market is sending.

expected bitcoin volatility Dropped after Indestructible 25000 dollars

According to data provided by The Block, Deribit’s Bitcoin Volatility Index (DVOL) plummeted throughout the last week, which appears to be a direct result of Bitcoin’s recent failure to break above $25,000. This could have a significant (and more likely bullish) impact on short-term volatility. DVOL was 50, down from 60 at this time last week. This figure is not much higher than the all-time low of 42 in January, just before the 2023 cryptocurrency bull market actually occurs.


Source: Blocks

On the other hand, underlying volatility in at-the-money option (ATM) valuations is also slipping, leading to the largest decline in short-term volatility forecasts. According to data provided by The Block, Bitcoin’s seven-day underlying volatility is 44.55%, down from 60.33% this time last week. The 30-day, 60-day and 180-day underlying volatility also fell to 47%, 50% and 53.5%, respectively, from 57%, 58% and 58% this time last week.

Source: Blocks

options market make a prediction price bitcoin paradox

Considering the options market’s view on Bitcoin’s prospects, the picture remains unclear. On the one hand, the ratio between open interest (OI) for puts is generally trending down, while calls are generally trending up, which certainly favors calls and is almost at record levels. Specifically, the put/call open interest ratio was recently at 0.42, just above the all-time low of 0.39 hit earlier this month.

Source: Blocks

On the other hand, the 25% skew delta biases for Bitcoin options expiring in 7, 30, 60, 90, and 180 days are all close to zero, implying a neutral positioning bias. Skew 25% delta skew is a generally concerned expression of the degree to which trading desks charge more or less to protect bullish or bearish momentum through the puts and calls they sell to investors.


Source: Blocks

A put option gives an investor the right, but not the obligation, to sell an asset at a predetermined price, while a call option gives an investor the right, but not the obligation, to buy an asset at a predetermined price. A Skew 25% delta deviation above zero indicates that the table charges more for equivalent calls than puts. In other words, calls are in higher demand than puts, which can be interpreted as a bullish signal as investors look to protect (or bet on) the possibility of rising prices.

  • Decentraland (MANA) May Slip in March
  • Upbeat Chinese Manufacturing Data Pushes Bitcoin Up 4%
  • Bitcoin sees outflows for third week in a row

front page

According to Cryptonews

Stay in the Loop

Get the daily email from CryptoNews that makes reading the news actually enjoyable. Join our mailing list to stay in the loop to stay informed, for free.

Latest stories

- Advertisement - spot_img