Deribit’s future-looking Bitcoin volatility index, or what many consider as a crypto “fear gauge”, has reportedly hit its lowest value since its launch. This trend, observed by Greeks Live, suggests the probability of limited turbulence in Bitcoin’s near-term price activity. The volatility index for Bitcoin has reportedly plummeted to a multi-year low of 37%.
The Bitcoin Implied Volatility Index is derived by assessing crypto options activity and offers a projection of expected volatility for Bitcoin over the next month. At present, it’s at the lowest level in crypto’s nascent history, according to the DVOL algorithm. Greeks Live attributed this trend to consistently low liquidity, suggesting that derivatives traders anticipate minimal major moves in crypto markets in the near term.
This observation elicits a paradoxical sentiment. On one hand, this indicates that the overall volatility of cryptocurrencies is diminishing, which would compel the implied volatility to keep setting new lows. On the other hand, it could pose an opportunity as predictions in the crypto market often swing the other way.
Crypto analyst Josh Olszewicz noticed that Bitcoin’s weekly Bollinger Bands have constricted to record levels. Bollinger Bands are statistical charts that depict volatility and prices of an asset over time, comprising a middle trend line flanked by two outer bands. Crypto markets have roughly maintained their position since mid-March, with total capitalization oscillating around $1.2 trillion.
The implications of low volatility are twofold. Reduced price fluctuations could deter potential investors seeking substantial short-term gains. Conversely, lower volatility may render the digital currency market more inviting for traditional investors. In essence, a period of low volatility could be the calm before the storm, setting the stage for the next major movement in the market.
Presently, Bitcoin is trading at $29,097, a decrease of 2.36%, while Ether is priced at $1,849 after a drop of 1.17%. Most of the top cryptocurrencies are currently in the red, reflecting a slight downtrend in the market. Whether the drop continues or the market rebounds back into the green remains to be seen in the days to come, but it’s clear that the crypto trading playground will never cease to enthrall its participants.
Source: Cointelegraph
