Bitcoin’s price has fallen sharply in the last month, bringing it below the $40K mark. The digital asset’s downtrend had then promptly dragged their metrics like implied volatility down with it. The bears now have an even tighter grasp on the market. This has made this decline more severe. This could spell doom for some. Others may see this as a window of opportunity.
Bitcoin Implied Volatility Crumbles
Bitcoin’s implied volatility is a metric that is used to illustrate investor expectations of future price volatility of the digital asset going forward. This metric is important in the cryptocurrency space, and it can be used for a variety of other actives to show investor expectations regarding volatility. Investors who see this as high indicate that they expect price volatility to continue rising in the future. This is why it is so important for short-term investors.
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Since the beginning of 2021, bitcoin’s implied volatility has been in a downward trend. It follows similar price movements that have seen a similar decline in their value. However, the implied volatile downtrend for bitcoin has increased even further at the start of 2018. Important to remember that bitcoin’s implied volatility (IV), is low, which is unusual.
Source: Arcane Research| Source: Arcane Research
Because of these low levels volatility bets can become more appealing to bitcoin users who are able to buy both call and put options. The good thing about bitcoin’s low IV levels is their tendency to last for a long time. This is evident in the six-month-long period that December 2020 saw from June 2020, when low IV levels were recorded.
Bitcoin’s IV is being impacted by a number of factors, including decentralized finance (DeFi) innovations that are popping up around the corner.
BTC Price Movements
Over the last few months, Bitcoin has moved more or less in an unpredictable manner. The digital asset experienced a steady decline after reaching its $69K peak. It lost over 30% of its all-time high. The market has been ravaged by the fact that the high digital asset is known as a market mover, with the total market value of the company dropping to $300 billion.
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Bitcoin, however, has held steady above $40K. Bitcoin continues to support this level, which suggests that bulls should hold on to it and bears must be defeated.
BTC now at $42K | Source: BTCUSD on TradingView.com
BTC’s price has increased from low $41,000 up to high above $42,000 over the last 24 hour. That is an increase of approximately $1,000 just as midweek trading begins. The current trend in the price of this digital asset is at $42,300. Indicators point towards a retesting of the $42,500 resistance.
Featured image taken from Binaryx. Arcane Research charts and TradingView.com chart.