Deribit’s Bitcoin Volatility Index Reaches All-Time Lows, Signaling Potential Period of Sideways Movement


Deribit, a prominent crypto options exchange, is currently experiencing historically low levels of Bitcoin (BTC) volatility in its future-looking volatility index, indicating a potential period of price stability for the cryptocurrency in the near future.

On July 24, the crypto derivatives analytics platform, Greeks Live, reported that both the Bitcoin and Ether volatility indices on Deribit have reached a multi-year low of 37%. Moreover, the implied volatility level, according to the DVOL algorithm, has dipped to the lowest level ever recorded in the cryptocurrency market.

The Deribit Implied Volatility Index, known as DVOL, gauges the expected volatility for a crypto asset over the next 30 days by analyzing options activity. Essentially, it offers insights into investors’ expectations for price turbulence.

Greeks Live attributed the persistently low implied volatility (IV) levels for Bitcoin to ongoing low liquidity in the market. This lack of confidence among derivatives traders indicates that they do not foresee significant price movements in the short term, suggesting that the prevailing low volatility is likely to persist.

Several other analysts using different metrics have corroborated this sentiment. Crypto analyst Josh Olszewicz noted that Bitcoin’s weekly Bollinger Bands have contracted to record levels on July 24. The Bollinger Bands, a statistical chart depicting asset prices and volatility over time, currently exhibit the tightest range ever observed on the weekly timeframe.

Over the past few months, the cryptocurrency markets have been range-bound, with the total market capitalization hovering around $1.2 trillion. Apart from a brief peak in mid-April and a short trough in mid-June, there has been minimal deviation from this level.

The decline in overall volatility in the cryptocurrency space is an unmistakable trend, pushing implied volatility for cryptocurrencies to new lows. As the market conditions continue to reflect subdued price swings, traders and investors may anticipate a continuation of sideways action in the short term. However, given the unpredictable nature of the crypto market, any sudden developments could still lead to unexpected shifts in sentiment and price trajectories.

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