Topic: Bitcoin implied volatility below 40 for the first time: Sign for a bull run? (Read 562 times)

And perhaps the final update to this thread:

The low implied volatility phase seems to have ended. Since a couple of days, the BitVol has broken the value of 50 again to the upside, reaching even 60 in one occasion:



Source: T3Index BitVol

As the "realized" volatility looks not too different than in the last weeks (we still see no really wild price swings, only we climb from one level to the next ...) it seems that the increase is primarily caused by options prices finally recovering.

Meanwhile the price also broke the 32k resistance, rallying up to the 34-35k area in only a few hours and staying there quite stable.

So I would say that the assumption I made in the OP looks to have materialized, even if it took a long, long time to do so (but as in other occasions before, the low-vol phase as a whole preceded a price increase). It's however too early to confirm this is really a "bull run" like those we had seen in the past. But it doesn't look bad, at least for now

Small update: The very low implied volatility phase is still ongoing. The BitVol index stays firmly below 50. The long term chart of the indicator shows how unusual this is (at least since 2019):


Source: BitVol

Even if BTC failed to cross the 32k resistance level sustainably (until now) and it even looked a bit bearish during some time, with some below-25k dips, it seems that the assumption I made in the OP could be still intact: that after this low-volatility phase a bull run could be starting.

It seems however the low volatility phase is unusually long this time, and the recent little swings up to 30k and down to 26k haven't really changed that. A look at the "realized" volatility long term chart confirms that even if we compare the current period with data from pre-2019, never such a long low-vol period has been recorded:


Source: BuyBitcoinOnline

Seems simply we have to wait a little bit more if the assumption will become true.

I think Bull Run will occur when the end of the year or about 2 or 3 months, even though the market is currently red but the chance of Bull Run is always easy if there is a positive sentiment and the big issue that occurs is the beginning of 2024 there will be a Halving Day which will make a request on Market increases significantly.

Volatility is on the rise again. Even before the dip yesterday, the BitVol went up to 43 (which was still a low value). Until now there was no further update, but I expect it now to be close to 50.

However, what I would like to discuss is if the theory that volatility is currently "mispriced" on option markets which was brought up by Glassnode and I commented some days ago, could have favoured the deep flash crash which in some exchanges even went lower than $25000.

If put options were very cheap, then this was an opportunity to abuse it in a way very similar to a short:

1. Buy put options (Put options are those allowing you to sell Bitcoin for a fixed price, the so called "strike price".). When the BTC price was at 29000-30000, you should have been able to buy put options with a strike price of $28000 or so for cheap.
2. Wait for bad news, then join forces with other whales which created short sales, and dip the price.
3. Sell the (much higher priced) options.

Should yield a quite good profit, perhaps more than in a "regular" short sale operation.

I am sure that to people like me everything is a sign for a bull run. I get that some stuff do not mean anything and maybe this doesn't mean anything neither, but at the end of the day if this means that we are going to end up with a profit the new are going to end up with a profit. That's how it happens and we should be considering it as a profitable thing. Obviously not everything works that way, sometimes it goes down as well, and these type of things causes it to drop lower.

But considering the volatility is low, that means even just a small spark could cause a huge fire for bitcoin to go up. This is why we need that little part to start it all, and we are waiting for that to start soon enough, it should probably happen soon.

We’ve been consolidating in a really tight range for what feels like an eternity. Would be really good if we break out to the upside soon. There are murmurings of extreme downside in legacy markets soon though. Big Short Michael Burry recently shorted stocks with over 90% of his net worth (does he know something?). Hopefully bitcoin doesn’t follow stocks if that is the case, problem is though it usually does.

https://amp.cnn.com/cnn/2023/08/15/investing/michael-burry-stock-market-crash/index.html

Whatever the current price is certainly a good opportunity to buy. We are still half the price for the last ATH and a chance to collect bitcoins before the halving is reached. Hopefully near or after the halving we will enter into the bull run market that everyone has been waiting for. Those who start entering will have a great opportunity to benefit than those who just delay entering without doing anything. Year-end price target might be him over $40k and that's still pretty reasonable, we're still seeing bitcoin in the $29k-$3k price area today but that's about to jump high soon, looking forward to the best for bitcoin.

Of course we hope the bull run comes soon, I would like to see this year close at least $60k so that makes a good start for the bull run which will be in 2024 when the halving day happens, when prices are as cheap as they are now then a good opportunity to buy.

Today the Bitmex 24H volatility index hit a new all time low. Basically Bitcoin has never traded in such a tight range ever.

If it wasn’t for all these KYC exchanges then perhaps one could buy some calls/puts and bet on this volatility to explode some day. Most likely sometime in the fall. However we have no idea knowing which way it will breakout.

BitVol turned down again in the last days and now we've seeing the almost incredible value of 36.4 (the last low was 37.08). I guess thus the short but hefty increase I reported in my last post had to do with the slight BTC/USD price increase some days ago.

It has been speculated that another sign for an incoming bull run are long positions taken by some Bitcoin whales. For now, I still think a dip down to 28K is possible due to "sideways market fatigue", but there are quite many signs that the mid-term outlook looks quite positive for Bitcoin's price.

BTW: It would be cool if some people with knowledge on options prices could comment on the question: do you think Bitcoin's volatility is currently mispriced?

Definitely a sign for a bull run, doesn't guarantee that it will be a bull run, but it does make it look a lot more like it is going to happen. This is why we should be a bit more careful about what we are doing, and should focus on what the result could be.

I understand that it is not going to be simple, but we need to make sure that things go easier for us on the long run as well. I get it, it is not simple and I really do get it, but that doesn't mean that we need to make sure that we are ready for anything. The bull run is not that easy and that should not be that simple and we should be ready for both going up and going down and if we are ready for both of it then we should be considering the situation according to how it goes.

Yes, it is true, Bitcoin volatility is pro-cyclical and nowadays Investors may have lost faith in institutions like governments and central banks and turned to Bitcoin as a safe haven, but, nowadays it is a bit difficult to understand Bitcoin price fluctuation even though we know the volatility of the US stock market has an effect on the long-term volatility of Bitcoin. indeed, if we also look at Google Trend regarding the index spike Volatility is closely related to coinciding with major events, both positive and negative in the money market.

Right now the Bitcoin price range in the market is also still around $30K and even less, but for the optimists most of the people who believe will see a price of $50K in Bitcoin may only be for the end of this year or before the halving occurs. Because the bull run probably won't happen in the near future, but expecting an increase before the halving I don't think it would be wrong either, because with that kind of expectation I think it will encourage some people to continue buying before the price increase occurs.

In a sudden turn, the BitVol index jumped 10% up to 44. And that without the Bitcoin price leaving the current range of 28.6-32k - it's even still in the "inner" range of the sideways channel, 29-30K.

I can only speculate on the reasons. (Remember, the BitVol index is calculated using option prices, so if options are cheap, the index has a low value. I write that because in many of the previous posts the topic switched to "historic", i.e. "realized" volatility, not implied volatility).

First, there was a small, but relatively sudden price increase yesterday. This could have "waked up" the people trading on option markets, and remembered them that we're still not registering Forex volatility values

This could be a bullish sign: People could be buying call options, to be able to buy BTC cheap if it goes up.

Second, Glassnode has published a newsletter recently, where they speculate about option prices being undervalued:


Source: https://insights.glassnode.com/the-week-onchain-week-32-2023/

Volatility "mispriced" refers to options being "too cheap". Of course, if a major Bitcoin analysis firm publishes such an opinion, this could have implications on the real options market: people now could be buying options, realizing that there may be an opportunity if they really are "mispriced".

By the way, the "realized" volatility stays very low at 0,79% according to the Bitcoin Volatility Index.

Since March when the price touches $ 30k, many are optimistic that the price of $ 50k will be easily achieved before June, now it is August and the price looks difficult to rise, even in May the price has dropped below $ 25k, and we hope that the market will improve soon so that Bull Run will soon occur.

If anyone is trading, there is still the possibility to make money through good limit order discipline however it would take a long time to get a return, and it would be a true test of patience. If I were to speculate, a drop is imminent. The price never stabilizes in this way before a rally, usually there is a sharp dip to liquidate longs, followed by a quick rebound upward.

It is possible that the ETF and the EDX market news was just to provide more liquidity for the year, as whales sell-off prior to another dump, then when all of the infrastructure is ready the run will continue again. I also suspect a covid-like event to spark the next run too, and more accelerated. As people won't buy into it again and instead, will be angry at the tyranny behind it.

In my opinion, we have slowly to say goodbye to the halving incited cycles. IMO the bull run in 2019 was already a sign that halvings now don't matter anymore. But just the Covid crash you mentioned, clearly an external factor - the fears started already in January 2020, which had flattened the recovery after a bearish short-term trend in late '19 - may have prevented BTC from reaching an ATH before the halving in this occasion. It was very close: in 2019, almost 15000 were reached on some exchanges, and the ATH was lower than 20000.

I however agree with you that there's no need to become delusional just at every slight sign for a possible bullish move. However, the volatility data is at least ... very interesting (It's also a good long-term sign, we're clearly trending towards stabler prices again, which may be good for further adoption, after the 2022 volatility spikes.)

I agree about the 32K as a major milestone, although I'm not a fan of weekly charts in a 24h/7d asset like BTC I'd change it to: "5 days above 32K and we're a step further" in the bull market.

I could agree with that, but I think once we're past 35K volatility may go up again - to the bullish side. So if we see 35K in September, I believe we'll see at least 50 K (even if it's only a short spike) before the end of the year. 35K, or any value significantly over 32K, would break all MAs and EMAs to the upside, so the impression of the general public will be that Bitcoin left the problems of 2022 (FTX, Terra/Luna) behind and the community is optimistic again.

Bitcoin has essentially been flat for the past 4 months (of course with some volatility in there from $25k-$31k during that period, but overall flat), so eventually yeah it'll break out, and probably fairly soon. I would guess it'll break out of this ~$30,000 range by end of August, maybe getting up to $35k in September. I'm expecting to see $40k get hit before the end of the year.

We all know that halving is near and, on every bitcoin move, you will say people saying that this is a bull season start time. They will link every bitcoin pump, dump or no volatility to the sign of the start of the bull season.

If we see the past data, we will see that there is a major bitcoin crash very near to halving, last time it was a covid crash. I am not saying that we will see another major crash before the start of the bull season, but we still cannot say that the bull market is officially started.

Seeing the price action, bitcoin needs a weekly confirmation over 32K and then we may say that we are in a proper bull trend.

The condition of the Bitcoin price today is still in an increasing condition to go to $ 30K again, although I would not consider that to be the end of the bears, because a decline in prices is still possible. But in the current conditions I am more confident that an increase to return to $ 30K is very possible and for the bullrun period it will probably be more visible in the next year, not this year although Bitcoin still looks stronger in the current price range with a more directional price bounce to the top.