Bitcoin (BTC), the largest cryptocurrency by market capitalization, hit an all-time high above $109,000 on Monday, sending both implied volatility and realized volatility to the highest levels since the end of carry yen trade in August.
Realized volatility corresponds to historical fluctuations in the price of Bitcoin over the last 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 of future price movements derived from the price of options. 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 reversals show calls trading at a premium to put options which offer downside protection,” said Omkar Godbole, a market analyst. and Markets Editor at CoinDesk
Additionally, short-duration call prices are higher than long-duration calls, a rare phenomenon that indicates strong short-term bullish sentiment, according to Andre Dragosch, European head of research at Bitwise. Open interest in options increased by 44,000 BTC, reflecting increased speculative activity, Dragosch noted.
Traders are expecting a rapid 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 coming days,” suggests Mitch Galer, trader at GCR. “Speculation on a strategic crypto reserve and potential deregulation, crypto markets optimistic about further gains this year.”
