Deribit’s Bitcoin Volatility Index Falls to a Record Low

Jimmy Aki
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Deribit, a leading crypto options exchange, has recorded its Bitcoin Volatility Index reaching its lowest level in two years. This indicates a possible lack of significant price fluctuations for Bitcoin in the near future.

Volatility for BTC and ETH Drops To 37%

In cryptocurrency trading, market volatility has always been a defining characteristic. However, recent developments on the Deribit exchange have sparked the interest of traders and analysts alike.

According to GreeksLive, a prominent crypto derivatives analytics platform, Bitcoin and Ether’s volatility indices hit their lowest point in two years, standing at 37% on July 24.

Additionally, the current implied volatility level, as indicated by the DVOL algorithm, is at an all-time low in the history of cryptocurrencies.

GreeksLive also highlighted that the persistently low liquidity has significantly suppressed the volatility levels.

Despite a rapid decline in the market today, with Bitcoin reaching a new short-term low of $29,000, the expected increase in volatility did not materialize. Most term volatilities remained unchanged, resulting in a stagnant market.

Moreover, GreeksLive observed that due to the low liquidity, the market experienced more spikes and drops, leading to daily options prices soaring up to 7 times higher. This trend is likely to continue in future markets.

These findings suggest that derivatives traders lack confidence in significant short-term market movements, and the current low volatility is expected to persist.

Deribit is a leading cryptocurrency derivatives exchange that offers a variety of trading instruments, including options and futures contracts on $BTC and other cryptocurrencies.

On March 27, 2023, the exchange introduced the Deribit Volatility Index (DVOL) to measure and track $BTC volatility. The DVOL aims to determine the anticipated 30-day annualized volatility based on the prices of $BTC options available on the Deribit platform.

A high DVOL indicates that market participants anticipate significant price fluctuations in the near future, while a low index suggests that traders expect relatively stable price movements over the same period.

The record-low DVOL on Deribit may also reflect broader market sentiment. It could indicate that investors and traders are gaining more confidence in $ BTC’s position as a store of value and view it as a less speculative asset compared to its earlier years.

Analyst Echo GreekLives’ Sentiment

Traders are always looking for indicators that can provide insights into market movements, and one such indicator is Bollinger Bands. A recent analysis by cryptocurrency expert Josh Olszewicz echoes the views of GreeksLive.

On July 12, Olszewicz pointed out that Bitcoin’s weekly Bollinger Bands had shrunk to unprecedented levels, a rarity seen over the past decade.

The Bollinger Bandwidth for $BTC dropped to 0.04 during this time, the lowest point since early January, as reported by the TradingView charting platform.

Continuing his analysis, on July 24, Josh noticed another historical record-level contraction. He observed that, on the weekly timeframe, the Bollinger Bands were at their tightest ever.

Bollinger Bands are a statistical chart that analyzes asset prices and volatility over time. They consist of a middle trend line and two outer bands located two standard deviations apart.

The bands include a moving average line, usually based on a 20-day simple moving average, along with two standard deviation lines plotted above and below it.

To measure the bandwidth, experts typically calculate the difference between the upper and lower bands and divide it by the 20-day SMA of prices.

The standard deviation lines expand or contract based on the asset’s level of volatility. A narrowing of the bands indicates reduced volatility, often signaling a consolidation phase before a significant price movement.

Past data suggests that such tight squeezes in Bollinger Bands often precede a shift in market sentiment, potentially leading to a breakout in the future.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.