The future-looking Bitcoin volatility index of crypto options exchange Deribit has reportedly reached its lowest level in two years, indicating a potential lack of price turbulence for Bitcoin in the near future.
On July 24, the volatility index for both Bitcoin and Ether fell to a multi-year low of 37%, as reported by crypto derivatives analytics platform Greeks Live. The current implied volatility level has also fallen to the lowest in crypto’s history, according to the DVOL algorithm, which analyzes option activity to gauge the expected volatility for a crypto asset over the next 30 days.
Greeks Live attributes the continued low liquidity in the market as the primary reason for the severely depressed implied volatility levels for Bitcoin. This suggests that derivatives traders are not anticipating major price movements in the short term, and the lack of volatility is likely to persist.
Other analysts using different metrics have also observed the decline in crypto market volatility. For example, crypto analyst Josh Olszewicz noted that Bitcoin’s weekly Bollinger Bands, which measure asset prices and volatility over time, have contracted to record levels. This indicates a period of historically low price volatility.
The crypto markets have been range-bound since mid-March, with the total capitalization hovering around $1.2 trillion. There has been minimal deviation from this level, except for brief peaks in mid-April and brief troughs in mid-June. This overall stability further supports the notion of reduced volatility in the cryptocurrency space.
As implied volatility continues to reach new lows, it suggests that the overall volatility of cryptocurrencies is declining, possibly leading to a period of relatively subdued price movements in the market.
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