Bitcoin options volatility hits a five-year low
Bitcoin options just got cheap. 10x Research says near-term implied volatility fell to 33.5%, the lowest in five years.
Implied volatility is how big a move the options market expects. When it's low, traders aren't pricing in much, and options cost less.
The number also sits more than 4 points below realized volatility. So Bitcoin has been moving more than options are priced for. That's what cheap looks like.
People are still buying protection, though. Over the past week, traders piled into October puts at the $78,000 and $80,000 strikes. One trade alone hit $204 million. 10x reads it as investors staying long and hedging, not turning bearish.
Other data lines up. The BVIV, Bitcoin's implied vol index, bounced off year-to-date lows near 34% and has struggled to get above 40%. Leverage demand is low. On Deribit, puts with strikes from $55,000 to $80,000 dominate volume. Bitcoin was trading below $83,500 on Saturday.
Part of this is a market growing up. Greeks.live said earlier this month that implied vol is still at multi-year lows, just above the extreme quiet of this summer. They also said a steady slide in vol was always expected as the market develops.
Low vol doesn't mean a calm price, though. Analyst Murphy counted three stretches this year where implied vol sat below 40%. Each one was followed by a big drop. After the January one, Bitcoin fell from $97,000 to $62,000. Three cases isn't a rule. Still, a quiet options market and a quiet price are two different things.
Options are the cheapest they've been in five years, and traders are using that to buy insurance. Nobody knows where Bitcoin goes next. Hedging just costs less right now.