Crypto Option Traders Maintain Shorting Bitcoin Volatility

The crypto market is recently buzzing with discussions about the impending explosion of Bitcoin volatility.Some traders are taking proactive measures as they continue shorting volatility to circumvent upcoming price dips.

Bitcoin's Realized Volatility and Implied Volatility Hit Multi-Year Lows

The price trend for Bitcoin since June 21 has been below a straight rally of over 4% in a day. BTC has maintained a price range between $29,000 and $30,000 since July 24, though it hovered over that in the previous month.

#BTC continues to reject at ~$29250

As long as that continues, bias favours to lower prices$BTC #Crypto #Bitcoin https://t.co/1q5qkhI4ok pic.twitter.com/GAy5oh3TPi

- Rekt Capital (@rektcapital) August 6, 2023

The major indicators that measure Bitcoin's past realized volatility and implied or estimated volatility dipped to multi-year lows.The outcome is affecting the decisions of some traders as they expect sudden and significant price changes.

Subsequently, some traders now consider purchasing Bitcoin call or put options as a hedge against potential bullish or bearish trends.

Such a move is called long volatility trade and could help traders to profit from possible price changes on the asset. Some traders, including Amberdata's director of derivatives, Greg Magadini, suggest a short trade.

In a market note, Magadini stated: Upside volatility likely remains far away unless BTC can take new year-to-date highs. The clearest catalyst for this currently revolves around a BTC spot ETF.

To maneuver short volatility, traders could start selling or writing calls or put options. This strategy is better if realized and implied volatility metrics give a rich appearance compared to historical standards or past averages.

In such cases, the token lacks any drive for price spikes, and implied volatility is more than realized volatility.

Currently, implied volatility (IV) and realized volatility (RV) don't support selling options or shorting volatility as they have reached multi-year lows. But the other two factors are doing so.

Spot ETF as Fundamental Catalyst for Volatility

There is a considerable drop in the initial optimism for spot exchange-traded funds (ETFs) filings in the US.Recall that several firms such as BlackRock, Invesco, ARK Invest, and others applied for spot BTC ETF in June.

The US Securities and Exchange Commission (SEC) still has a month to decide on the filings. According to data from Amberdata, Bitcoin's options-based implied volatility has hit an annualized 29.5% over the past 30 days.

The realized volatility has reached 25%. Also, the 7-day IV gave an equivalent trading premium to the realized volatility.

Reacting to the trend, Magadini noted that long volatility traders would bear more costs if there's no price change till the SEC makes an ETF decision. He noted that ETF is a fundamental catalyst for volatility but is still far away.

In an exclusive interview with CoinDesk, Griffin Ardern, a volatility trader at Blofin crypto asset management company, gave a similar indication. Ardern noted that one of the profitable trading strategies is selling volatility.

The post Crypto Option Traders Maintain Shorting Bitcoin Volatility appeared first on The Tech Report.