Navigating the Bitcoin surge: A deep dive into Implied Volatility

By tracking At-The-Money (ATM) Implied Volatility (IV) over a period of time, we can gain a standardized perspective on the expected volatility, which typically varies with actual volatility and the mood of the market. This measurement displays the ATM IV for options contracts due to expire one month from the current date.

According to data analysis by Deribit, the volatility experienced in June unveiled important details about the individual volatilities of Bitcoin and Ethereum. Ever since Glassnode started monitoring derivatives data, Ethereum has persistently displayed a higher beta value than Bitcoin, suggesting it has a higher level of volatility.

Yet, a fascinating shift occurred over the past fortnight. Bitcoin’s implied volatility unexpectedly overtook Ethereum’s. This surprising turn of events can be traced back to the reasons previously discussed.

Although there was a modest rise in volatility, Deribit pointed out that this increase was counterbalanced by the trading volume. Additionally, it mostly stayed within the lower limit range, even during volatile market conditions. According to Deribit, this phase of heightened Bitcoin volatility is the longest ever observed, suggesting it could be an emerging trend.