Record Breaking Bitcoin Surge: Options Frenzy Fuels 6-Month Volatility High

by

What to know:

  • Both implied and realized volatility indices hit six-month highs as the bitcoin price hit a record above $109,000.
  • As short-term speculation increases, bitcoin options open interest increased by 44,000 BTC ahead of the President-elect Donald Trump’s inauguration.

On Monday, Bitcoin (BTC) surpassed its previous high, reaching approximately $109,000, causing both predicted and actual price fluctuations to reach their peak since last August’s yen carry trade dismantling event. In simpler terms, the value of Bitcoin reached an unprecedented level, which triggered significant increases in anticipated and observed market turbulence since the unwinding of the yen carry trade incident in August.

As an analyst, I have observed that the daily price changes in Bitcoin over the past month, also known as realized volatility, reached approximately 67 on the Bitcoin Volatility Index (BVOL) on Deribit. Furthermore, the Bitcoin Volmex Implied Volatility index (BVIV) has peaked at a significant level of 71. To put it simply, implied volatility represents the market’s forecast for future price swings based on options pricing. Interestingly, both indices have increased by approximately 2% today.

The relationship between bitcoin’s price and its implied volatility continues to be strong. This suggests that traders are actively buying options, particularly call options, as the prices for these calls exceed those for put options, which provide protection against potential drops in value. (Omkar Godbole, a markets analyst and managing editor of markets at CoinDesk)

Furthermore, it’s unusual that brief call options are more expensive than longer ones, signaling a robust short-term bullish outlook, as pointed out by Andre Dragosch, the European research head at Bitwise. This increase in open interest for options by 44,000 BTC indicates an escalation in speculative activities, according to Dragosch’s observations.

Traders anticipate a swift increase in Bitcoin prices if President-elect Donald Trump plans to announce the creation of a strategic Bitcoin reserve.

According to Mitch Galer, a trader at GCR, Trump’s significant reliance on social media, known for influencing market trends in the past, is contributing to the current apprehension about the coming days. In the realm of cryptocurrencies, the speculation revolving around a potential strategic reserve and deregulation has sparked optimism among traders, leading them to believe that the crypto markets could experience more growth this year.

Read More

2025-01-20 14:56