Crypto options exchange Deribit’s Future Bitcoin (BTC) Volatility Index, used as a sort of cryptocurrency fear gauge, has reportedly hit its lowest level in two years, suggesting that Bitcoin may not see price volatility in the near future.
On July 24, cryptocurrency derivatives analysis platform Greeks Live noted that the volatility index for Bitcoin and Ethereum (ETH) had fallen to a multi-year low of 37%.
Furthermore, according to the DVOL algorithm, the current level of implied volatility has fallen to the lowest level in the history of cryptocurrencies.
The Dvol (volatility index) of BTC and ETH fell to 37%, the lowest level since two years ago, while the current level of implied volatility predicted by the Dvol algorithm has fallen to the lowest level in the history of cryptocurrencies.
Persistent low liquidity has severely inhibited… pic.twitter.com/GdWE4GHXZw— Greeks. live (@GreeksLive) July 24, 2023
DVOL is the Deribit Implied Volatility Index. It analyzes options activity to indicate the expected volatility of a crypto asset over the next 30 days. In simple terms, the index can indicate investors’ expectations for cryptocurrency price fluctuations.
Greeks Live noted that continued low liquidity has severely depressed Bitcoin’s implied volatility (IV) levels.
This suggests that derivatives traders are not confident of any major movement in the cryptocurrency market in the near term, and that the lack of volatility is likely to persist, the report said.
“The fact that the overall volatility of cryptocurrencies is declining will inevitably force the implied volatility of cryptocurrencies to new lows.”
related: Low Volatility in Cryptocurrency Markets: Curse or Opportunity?
Other analysts using different metrics echoed the same sentiment. On July 24, cryptocurrency analyst Josh Olszewicz Observed Bitcoin’s weekly Bollinger Bands have contracted to record levels. “This is officially the tightest Bollinger Bands on the weekly time frame,” he said.
Bollinger Bands is a statistical chart that depicts asset prices and volatility over time, consisting of a central trendline and two outer bands that are two standard deviations apart.
The cryptocurrency market has been range-bound since mid-March, with a total market capitalization hovering around $1.2 trillion. Apart from a brief peak in mid-April and an equally brief trough in mid-June, there has been little deviation from that level.
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