Bitcoin Implied Volatility Drops to Nine-Month Low

Bitcoin's implied volatility has fallen to the lowest level in nine months. On Monday, during the Singapore trading session, the Bitcoin Volmex implied volatility index, which tracks market expectations, dropped to 36.11, approaching the historical low since the beginning of 2023. The current price of Bitcoin is hovering around $77,000, struggling to break through the $80,000 mark, down nearly 40% from its historical high of over $126,000 in October last year. The weakening demand for option protection and the shift in speculative interest are the main reasons for the low volatility.

Capital flows confirm the cooling of market heat. Since May, the net outflow of U.S. spot Bitcoin ETFs has been about $1 billion, reversing the previous two months of inflows. Orbit Markets co-founder Caroline Mauron said that retail funds are moving to other trading opportunities. At this time, global risk assets are generally rising, with U.S. stocks reaching historical highs on the expectation that the U.S.-Iran war is expected to end, and South Korean and Taiwanese stocks also reaching peaks driven by AI and semiconductor demand. The shift of speculative funds to the fields of artificial intelligence and memory chips has led to a reduction in hot money in the crypto market.

The change in trading structure is also suppressing price volatility. Whenever there is a price movement, volatility sellers will quickly enter the market to earn option premiums. Rajiv Sawhney, Head of International Portfolio Management at Wave Digital Assets, pointed out that Bitcoin lacks inherent yield, and long-term holders, miners, and large funds have used selling volatility as a means to earn returns on their positions, making it difficult for price breakthroughs to be sustained. Damien Loh, Chief Investment Officer at Ericsenz Capital, believes that the outflow of ETF funds and the optimistic sentiment of the macro market offset each other, leading to a contraction in trading volume and further driving down implied volatility.