Traders Flock to Bitcoin Options Amid Falling Implied Volatility—Is a Major Shift on the Horizon?
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With the cryptocurrency market taking a moment to stabilize after surpassing the $3 trillion mark, traders are increasingly turning to leverage through options contracts for Bitcoin and Ethereum.
This increase in derivatives trading coincides with the consolidation of BTC and ETH prices, with Bitcoin fluctuating between $94,000 and $95,000 during this time.
This stable trading range is mirrored in the declining levels of implied volatility (IV). The 7-day IV for Bitcoin fell from 53% to 38% in the middle of the week, while the 30-day IV decreased to 43%, down from 50%.
Similarly, Ethereum’s volatility indicators followed suit, showing a decline from 74% to 61% for the 7-day IV and from 69% to 63% for the 30-day IV. This drop in volatility is creating a scenario that some analysts describe as favorable for leverage, enticing traders to explore options pricing dynamics.
Options Traders Prefer Bullish Exposure Amid Mixed Sentiment
Dr. Sean Dawson, the head of research at Derive.xyz, observed a notable inclination towards bullish positions among options traders. Dawson shared:
A remarkable 73% of all BTC options premiums are being utilized to purchase calls, with Ethereum showing an even greater figure of 81.8%.
Dawson indicated that the ratio of calls to puts stands at 3:1 for Bitcoin and 4:1 for Ethereum on Derive. However, he mentioned that this activity may not accurately represent broader market sentiment.
Data from Deribit, another significant crypto derivatives platform, revealed a more balanced approach, with a delta skew indicating mixed market sentiments.
While Derive users seem to be betting on rising prices, other exchanges show strategies that are better hedged. Nonetheless, Dawson emphasized that barring significant disruptions, BTC and ETH might maintain their current levels until the end of May. He articulated:
As for price forecasts, the outlook for BTC is steady, with an increasing probability of a bullish scenario. The chance of BTC reaching above $110K by May 30 stands at 11%, while the likelihood of it dipping below $80K has decreased from 11% to 8%. For ETH, the probability of it closing above $2,300 by May 30 remains at 9%, with the chance of falling below $1,600 reduced from 24% to 21% in the past 24 hours.
Bitcoin On-Chain Metrics Indicate Strengthening Fundamentals
Alongside the activity in the derivatives market, on-chain data points to growing investor confidence. A CryptoQuant analyst by the name of Yonsei Dent noted a resurgence in Bitcoin’s Market Value to Realized Value (MVRV) ratio.
With Bitcoin’s price climbing to $94,000, the MVRV ratio ascended to 2.12, approaching its 365-day moving average of 2.15. Dent noted that this implies holders are experiencing an average unrealized gain of around 112%, a figure historically linked to robust market positioning.
He further stated that if the 30-day MVRV moving average crosses above the 365-day average in a pattern known as a “golden cross,” it could signify a confirmation of returning bullish momentum.
Such indicators have preceded major rallies in prior market cycles. However, Dent stressed the necessity of continued monitoring of the MVRV trend to assess the sustainability of this uptrend.
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