• Realized volatility has just gone above options volatility for the first since FTX collapsed back in November.
• Each time this occurs, Bitcoin tends to tumble down in price
• At the beginning of 2023, volatility was multi-year lows for Bitcoin before Bitcoin surged to $21k.
The cryptocurrency market has been on a wild ride in the past few months, with Bitcoin (BTC) surpassing the $21,000 mark after months of consolidation. But one metric that has been quietly rising is the realized volatility of Bitcoin, which recently exceeded the options volatility for the first time since the collapse of the FTX exchange in November.
Realized volatility refers to the standard deviation of returns from the mean return of a market. In this case, the metric is measuring the volatility of Bitcoin over a one-week rolling window. When realized volatility is high, it indicates a period of high risk in the market.
On the other hand, implied volatility (IV) is the market’s expectation of volatility. By looking at the At-The-Money (ATM) IV over time, we can get a normalized view of volatility expectations.
The recent surge in realized volatility is a stark contrast to the beginning of this year when volatility was at multi-year lows. Just a few months later, we are now seeing realized volatility exceed options volatility for the first time since FTX collapsed.
At the time of writing, realized volatility is at 60%, while options volatility is at 59%. Each time this occurs, Bitcoin tends to tumble down in price.
It will be interesting to see how the market responds to this surge in volatility and if it will have any lasting effects on the price of Bitcoin.
It’s clear that the cryptocurrency market is still in a state of flux and that investors should be prepared for more volatility in the coming months. As always, it’s important to do your own research and be aware of the risks involved before investing in any asset.
