• Bitcoin’s annualized seven-day implied volatility (IV) has hit a two-year low of 38.2%.
• Analysts attribute the lack of volatility to the macro outlook being “extremely constructive”, with inflation falling and the decline in oil making the Ukraine war less relevant.
• Despite negative headlines, Bitcoin has risen 9% since BlockFi declared bankruptcy and 3% this week despite Binance coming under scrutiny.
The bitcoin (BTC) market has been surprisingly tranquil recently, with the annualized seven-day implied volatility (IV) dropping to its lowest level in two years. The IV, which measures the options market’s forecast of a likely movement in the underlying asset, had peaked at 145% on Nov. 9 but has since declined to 38.2%. Analysts are scrambling to explain the unexpected tranquility, especially in light of the FTX contagion fears and overall macroeconomic uncertainty.
Markus Thielen, head of research and strategy at Matrixport, believes that the decreasing volatility is not out of the ordinary. He says that the macro outlook is extremely constructive, with inflation falling and oil prices declining, thus making the Ukraine war less relevant. He also points out that the FTX headlines will now have less of an impact on the market, with investigations taking care of the details in the background.
Despite the negative headlines surrounding the crypto space, Bitcoin has managed to remain unaffected. In fact, since crypto lender BlockFi declared bankruptcy on Nov. 28, Bitcoin has risen 9%. Even when Binance came under scrutiny earlier this week due to customers withdrawing large sums of coins, Bitcoin still managed to gain 3% this week.
It appears that traders are no longer affected by the FTX collapse and have instead opted to buy options to hedge against any potential losses. This could explain why Bitcoin’s implied volatility has dropped to its lowest level since October 2020. With the macro outlook being so promising, it’s likely that the cryptocurrency’s tranquility won’t be ending anytime soon.