Bitcoin Price Surge Expected: Options Volatility Drops Despite Turbulence

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• Implied volatility (IV) for Bitcoin options decreased significantly in July.
• The IV for Bitcoin options on Aug. 3 is as follows: 1-Month Expiry 32.73%, 3-Month Expiry 37.78%, 6-Month Expiry 44.07%.
• The increasing IV for longer-dated Bitcoin options suggests that the market is expecting greater price uncertainty or volatility in the longer term, but a decrease in IV indicates that the market’s expectation of Bitcoin’s price volatility has reduced for the near term.

Implied Volatility (IV) and Options

Implied volatility (IV) is a metric that represents the expected percentage change in the price of an asset over a year, with a 68% probability. IV is an important measure when it comes to trading options as it helps traders understand how much price movement to expect from their option position over its duration.

Bitcoin Options Implied Volatility Drops

The implied volatility (IV) for Bitcoin options decreased significantly in July, indicating that the market’s expectation of Bitcoin’s price volatility has reduced for the near term. The IV for Bitcoin options on Aug 3 is as follows: 1-Month Expiry 32.73%, 3-Month Expiry 37.78%, 6-Month Expiry 44.07%. This decrease in implied volatility signals more confidence in Bitcoin’s stability, but high IV on 6-month options shows the market expects instability ahead .

Volatility Skew and Longer Term Expectation

The increasing IV for longer-dated Bitcoin options suggests that the market is expecting greater price uncertainty or volatility in the longer term, known as „volatility skew“. This pattern indicates that investors believe there will be more turbulence ahead even though they are currently feeling more confident about short term stability of bitcoin prices.

Data via Glassnode

Data via Glassnode shows that bitcoin holders are resisting exchanges as data points to potential price surge and CME bitcoin futures hit new highs as investor interest surges while whales are deep distribution mode returning 15k BTC back to exchanges .

Summary

In summary, implied volatilities have dropped significantly suggesting increased confidence in short term bitcoin prices while investors remain cautious about long term outlook due to higher implied volatilities and other data points such as whale movements pointing towards possible turbulence ahead