Bitcoin’s (BTC) volatility has dropped towards historically low levels due to macroeconomic uncertainty and low market liquidity. However, on-chain and options market data suggest that a decisive move in BTC price may be on the horizon in June. The Bitcoin Volatility Index, which measures daily fluctuations in Bitcoin’s price, indicates that the 30-day volatility in Bitcoin’s price is at 1.52% – less than half of the yearly averages across Bitcoin’s history, with values usually above 4%.
According to Glassnode, low volatility levels have only been seen for 19.3% of Bitcoin’s price history. Recent data also reveals that long-term Bitcoin holders have started to make moves during the recent correction, underpinning volatility. This could lead to a price breakout as the market moves primarily due to accumulation or distribution of long-term holder supply.
On the other side of the coin, the options market data indicates a more bearish outlook. The latest options expiry for May turned out to be uneventful, despite a significant expiration of $2.3 billion in notional value. However, the prolonged compression of volatility could signal a large incoming move in terms of price. Bitfinex’s latest Alpha report reveals that the DVOL index, which represents the market’s expectation of 30-day future implied Bitcoin volatility, slipped to 45 from a reading of 50 right before the expiry. This represents a yearly low reading.
Currently, options traders are exercising caution by increasing their bearish positions, moving from May to June. The put to call ratio for Bitcoin options increased from 0.38 to 0.50, indicating a growing bearish sentiment. Analysts at Bitfinex expect “potential market turbulence and short-term price fluctuations” in June, especially close to the expiration towards the month’s end.
In conclusion, while on-chain data suggests that long-term holders are preparing for a decisive move in Bitcoin price, the options market data highlights a bearish sentiment. This creates a seemingly paradoxical situation where the market could experience both heightened volatility and bearish positions. As it stands, investors and traders should be prepared for an eventful June with potential price fluctuations and market turbulence.
Source: Cointelegraph
