Bitcoin (BTC), the largest cryptocurrency by market capitalization, hit a record-high above $109,000 on Monday, sending both implied volatility and realized volatility to their highest levels since August’s yen carry trade unwind.
Realized volatility is the historical price fluctuation of bitcoin over the past 30 days. It reached 67 on the Bitcoin Volatility Index (BVOL) on Deribit. The Bitcoin Volmex Implied Volatility index (BVIV) reached a high of 71. Implied volatility is the market’s expectation for future price changes derived from options pricing. Both indexes rose around 2% on the day.
“The positive correlation between bitcoin price and implied volatility remains intact. This is a sign that traders are chasing options, especially calls, as risk reversals show that calls are trading at a premium relative to puts that offer downside protection,” said Omkar Godbole, a market analyst and managing editor of markets at CoinDesk
In addition, short-term calls are priced higher than longer calls, a rare occurrence that indicates strong short-term bullish sentiment, according to Andre Dragoschthe European head of research at Bitwise. Open interest in options increased by 44,000 BTC, reflecting higher speculative activity, Dragosch said.
Traders are expecting a rapid price increase following President-elect Donald Trump’s potential announcement of a strategic bitcoin reserve.
Trump’s “influential use of social media, which has previously moved markets, adds to uncertainty in the days ahead,” suggested Mitch Galer, a trader at GCR. “Speculation about a strategic crypto reserve and potential deregulation, crypto markets are optimistic about further gains this year”.
