BTC price volatility rises to 6-month high as options frenzy mounts

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 the highest levels since August’s yen-carry trade.

Realized volatility is the historical price swings of bitcoin over the past 30 days. It hit 67 on the Bitcoin Volatility Index (BVOL) on Deribit. The Bitcoin Volmex Implied Volatility Index (BVIV) hit a high of 71. Implied volatility is the market’s expectation of future price swings derived from option pricing. Both indices are up 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 reversal shows that calls are trading at a premium to puts, which offer downside protection,” says Omkar Godbole, a market analyst. and managing editor of markets at CoinDesk

Additionally, short-dated calls are priced higher than longer, a rare occurrence that indicates strong short-term bullish sentiment, according to Andre Dragoschthe European head of research at Bitwise. Open interest in options has increased by 44,000 BTC, reflecting increased speculative activity, Dragosch noted.

Traders are expecting a quick price rise following President-elect Donald Trump’s potential announcement of a strategic bitcoin reserve.

Trump’s “influential use of social media, which has historically moved markets, adds to the uncertainty surrounding the next few days,” suggested Mitch Galer, a trader at GCR. “Speculation on a strategic crypto reserve and potential deregulation, crypto markets are optimistic about further gains this year”.