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Bitcoin (BTC), Ethereum (ETH) Implied Volatility Eyes Historical Lows, Here's What This Means

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Sat, 01/15/2022 - 14:30
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Vladislav Sopov
Seasoned financial analyst Joshua Lim explains what tumbling implied volatility can tell us about major cryptos
Bitcoin (BTC), Ethereum (ETH) Implied Volatility Eyes Historical Lows, Here's What This Means
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Joshua Lim, head of derivatives at top-tier crypto broker Genesis Trading and former Circle exec, shares his take on volatility dynamics for Bitcoin (BTC) and Ethereum (ETH).

Hedge funds are not interested in buying Bitcoin (BTC) in low 40s

Mr. Lim has taken to Twitter to share his vies on Bitcoin (BTC) implied volatility dynamics in recent months. Implied volatility should be considered an indicator of the market's view of the likelihood of changes in a given asset's price.

The analyst noticed that, as Bitcoin (BTC) and Ethereum (ETH) are changing hands in the middle of yearly price range ($25,000-$69,000 for Bitcoin; $1,900-$4,600 for Ethereum), large-scale players are not interested in buying.

As such, there is no major catalyst for Bitcoin (BTC) volatility active right now. Bitcoin's (BTC) implied volatility dropped from 90 to 70 in less than two months.

This looks like the most radical retracement since early March 2021.

"Not screaming buy," but...

Historically, when implied volatility metrics bottom and start surging again, it is a huge positive driver for the price of the asset. Major reversals were registered in October 2020 and April 2021.

The entire picture does not "scream buy" for the analyst but still looks attractive in the mid-term perspective. Once the implied volatility metric rockets, it can almost double (reaching major highs at 120) in weeks.

Bitcoin, the flagship cryptocurrency, is changing hands at $42,790 (up 1.4% in 24 hours), while Ethereum (ETH) added 1.24% and attempts to hold above the $3,300 level.

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About the author

Blockchain Analyst & Writer with scientific background. 6+ years in IT-analytics, 3+ years in blockchain.

Worked in independent analysis as well as in start-ups (Swap.online, Monoreto, Attic Lab etc.)