BTC’s historically low volatility could change dramatically in June, with long-term holders making moves and options traders showing an increase in bearish positions. .
Bitcoin volatility has dropped to historic lows thanks to macroeconomic uncertainty and low market liquidity. However, options and on-chain market data alludes to the upcoming volatility in June.
The Bitcoin Volatility Index, which measures the daily volatility of Bitcoin (BTC), shows a 30-day volatility in the Bitcoin price of 1.52%, less than half of the historical yearly average. history of Bitcoin, with values often above 4%.
According to Glassnode, the expectation of volatility is a “reasonable conclusion” based on the fact that low volatility is seen for only 19.3% of Bitcoin’s price history.
The latest weekly update from the on-chain analytics firm shows that Glassnode’s actual monthly volatility metric for Bitcoin has slipped below the lower limit of the historic Bollinger Bands, showing that upcoming volatility.
Bolinger Bands for Bitcoin’s Monthly Actual Volatility Index. Source: Glassnode
LONG-TERM BITCOIN HOLDERS DATA INCLUDING A BREAKING IN PRICE
Bitcoin on-chain transfer volumes on crypto exchanges have dropped to historic lows. According to the report, the price is also trading close to the trend of short-term holders, indicating a “balanced position in profit and loss for new investors” who bought the coin during and after the 2021 bull cycle. 2022, according to the report. Currently, only 50% of investors make a profit, the rest lose.
However, while short-term holders reached equilibrium, long-term holders made a move during the recent correction, which underpinned volatility, according to analysts.
Glassnode categorizes coins older than 155 days in a single wallet by supply for long-term holders.
The gray bars in the image below show the Long-term Holder Spending Binary indicator, which tracks whether average LTH spending over the past seven days is enough to reduce their total holdings.
It shows previous instances when LTH spending increased, often followed by an increase in volatility.
Long-term Holder Spending Binary. Source: Glassnode
Bitcoin’s recent correction has seen a small drop in the indicator, “showing that 4 out of 7 days experienced a net divestment of LTH, which is similar to liquidity exit events that have occurred.” seen from the beginning of the year until now”.
Analysts expect a wave of volatility to reach an equilibrium, where the market moves primarily due to the accumulation or distribution of supply by long-term holders.
OPTIONS MARKET REFERENCES TRADERS’ EXPECTATIONS ON VALITY
Options market data points to a similar theory of impending volatility.
The options market’s latest expiration in May turned out to be a dull event, despite its nominal value of $2.3 billion. However, prolonged volatility compression could indicate a big move to come in terms of price.
Bitfinex’s latest Alpha report shows that the DVOL index, which represents the market’s expectations for Bitcoin’s future volatility over 30 days, has dropped to 45 from 50 just before expiration, representing a high annual low.
DVOL Indicator for Bitcoin Options. Source: Bitfinex
Implied volatility in options refers to the market’s expectation of the future volatility of the underlying asset, as reflected in the price of the options.
Bitfinex analysts said expectations of low volatility could be attributed to “coming events that are expected to change the market” or “increased uncertainty or risk aversion among those expected to change the market.” market participants”.
Currently, options traders are showing risk aversion and have increased their bearish positions, moving from May to June.
Bitcoin call options ratio has increased from 0.38 to 0.50. The higher weight of put options shows that traders are increasingly turning bearish on Bitcoin.
Analysts at Bitfinex are now expecting “potential market turbulence and short-term price volatility” in June, especially with expiration nearing the end of the month.
Potential price levels that could act as a magnet according to the options market positioning are the maximum pain levels for the May and June futures at $27,000 and $24,000, respectively.