Deribit’s Crypto Options Market Record-Low Implied Volatility

Deribit’s cryptographic options market is future-oriented. The Bitcoin (BTC) volatility index used as a measure of crypto anxiety has reportedly reached its lowest level in two years, indicating a potential lack of price volatility shortly.

Greeks Live, an analytics portal for crypto derivatives, reported on July 24 that the volatility index for both Bitcoin and Ether has reached a multi-year low of 37%.

Moreover, according to the DVOL algorithm, the present implied volatility level has fallen to its lowest level in the history of cryptocurrencies.

The Deribit Implied Volatility Index is denoted by DVOL. Analyzing option activity indicates the expected volatility of a crypto asset over the next 30 days.

The index can indicate investors’ expectations for a cryptocurrency’s price volatility.

Greeks Live noted that Bitcoin’s implied volatility (IV) levels have been drastically reduced by persistently low liquidity.

This suggests that derivatives traders are uncertain about the likelihood of significant crypto market movements soon, and the lack of volatility is likely to persist, the report stated.

“It is an indisputable fact that the overall volatility of cryptocurrencies is declining, which will inevitably force the implied volatility of cryptocurrencies to keep going to new lows.”

The sentiment has been reinforced by analysts employing various metrics.

Crypto analyst Josh Olszewicz observed on July 24 that Bitcoin’s weekly Bollinger Bands had contracted to record levels.

“This is officially the closest Bollinger Bands have ever been weekly,” he stated.

Bollinger Bands are a type of statistical chart used to characterize asset prices and volatility over time. Bollinger Bands comprise a central trend line and two outer bands separated by two standard deviations.

BTC weekly Bollinger Bands, all time. Source: Twitter/CarpeNoctom

Since mid-March, crypto markets have been rangebound, with total capitalization lingering around $1.2 trillion. Except for fleeting peaks in mid-April and mid-June, there has been very little deviation from this level.