Bitcoin Volatility Surge Could Indicate Return to Options-Driven Prices, Analyst Suggests

Bitcoin’s implied volatility remained under 80% following the approval of Bitcoin ETFs in the United States, according to Jeff Park, a market analyst and advisor for the investment firm Bitwise. However, as of now, Park's shared chart indicates that Bitcoin’s volatility is increasing again, approaching 60.

Key Takeaways

Bitcoin's implied volatility is rising towards 60% after remaining below 80% since the U.S. ETF approvals.
Historical spikes in volatility often precede significant price movements, as seen in the 2021 bull run.
Market analysts remain divided on the effects of ETFs and institutional investments on Bitcoin's volatility.
Current market conditions reflect short-term challenges rather than weakening Bitcoin's long-term fundamentals or demand.

Bitcoin volatility surge may signal return to options-driven prices: Analyst

Bitcoin Price, Bitcoin Analysis, Volatility _Historical BTC volatility levels show significant spikes before the approval of Bitcoin exchange-traded funds in the US markets in 2024. Source:_Jeff Park

Park referred to Bitcoin’s sharp price movements in January 2021, which marked the beginning of the 2021 bull run that pushed BTC to a record high of $69,000 in November of the same year, as a previous example of an options-driven spike. He pointed out:

“This analysis challenges the notion that the introduction of ETFs and the influx of institutional investors have permanently reduced Bitcoin’s price volatility and transformed its market structure into one that resembles a more mature asset class, supported by passive investments from various financial instruments.”

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Increasing Volatility Amid Market Unrest Sparks Concerns of Extended Decline

According to Richard Teng, CEO of Binance, the rise in BTC market volatility aligns with trends observed across all asset classes.

Bitcoin Price, Bitcoin Analysis, Volatility _Bitcoin's implied volatility rank and percentile in comparison to historical averages. Source:_Deribit

On Thursday, Bitcoin plummeted below $85,000, raising concerns about additional downturns in the weeks ahead, potentially signaling the start of another bear market.

Analysts have proposed various reasons for this decline, including the liquidation of highly leveraged positions in derivatives, long-term BTC holders selling off their assets, and pressures from the macroeconomic environment.

However, according to experts at crypto exchange Bitfinex, the current BTC downturn is attributed to short-term dynamics and reflects "tactical rebalancing," rather than indicating a departure of institutional investors or a decrease in demand. The analysts emphasized that this does not undermine Bitcoin's long-term fundamentals, including its price growth and increasing institutional adoption.

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