In an intriguing twist for the crypto market, Deribit’s Bitcoin Implied Volatility Index, a crucial indicator of price turbulence, has hit its lowest point since the exchange introduced it in early 2021.
The crypto world watches closely as the index’s plummet raises questions about the future movement of Bitcoin’s value. On July 24, Greeks Live, a prominent crypto derivatives analytics platform, reported a significant drop in the volatility index for both Bitcoin and Ether, measuring a multi-year low of 37%. Adding to this noteworthy development, the current implied volatility level has reached an unprecedented low in crypto’s history, according to the DVOL algorithm.
The DVOL algorithm, also known as the Deribit Implied Volatility Index, plays a crucial role in assessing a crypto asset’s expected volatility over the next 30 days. By analyzing option activity, this index effectively communicates investors’ predictions for a cryptocurrency’s price turbulence. As DVOL suggests, the recent downturn in implied volatility results from ongoing low liquidity in the market.
Bitcoin’s Traders Show Caution Amid Limited Volatility
Greeks Live’s analysis hints that derivatives traders lack confidence in major price movements within the crypto markets in the short term. Consequently, the subdued implied volatility is expected to persist, keeping Bitcoin in a relatively calm state.
This sentiment echoes the observations of crypto analyst Josh Olszewicz, who pointed out that Bitcoin’s weekly Bollinger Bands reached historically tight levels on July 24. These Bollinger Bands are statistical charts that gauge asset prices and volatility over time, with the recent contraction signifying limited price fluctuations.
Since mid-March, crypto markets have remained rangebound, hovering around a total capitalization of approximately $1.2 trillion. With only brief spikes in mid-April and slight troughs in mid-June, the overall stability of the market reinforces the idea that Bitcoin may continue to experience sideways trends.
The crypto community awaits the next turn of events, the prolonged period of low volatility presents both opportunities and challenges for investors. As always, the future of Bitcoin’s trajectory remains uncertain, and only time will reveal whether this calm streak will persist or give way to more dramatic price swings.