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Bitcoin’s Implied Volatility highlights declining investor interest in the market

2min Read
Bitcoin's Implied Volatility indicator suggest a declining interest of investors in the market

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Bitcoin, pioneer of the cryptocurrency space, has seen a continuous decline in its price since July. Investors and traders had high hopes from the digital currency after an extended bear market throughout 2018, with many analysts predicting that Bitcoin will surpass its 2017 highs. However, looking at the current market trends, that does not seem to be a possible outcome.

Looking at key technical metrics, the interest of traders in the market is going down as well. Skew markets, a  crypto-market analytical firm, highlighted the same after it recently tweeted that Bitcoin’s one month At-The-Money Implied Volatility (ATM IV) was sub 60% for the first time since May.

ATM IV is a key technical indicator that reflects a “measure of market participants’ future expectations for volatility as implied by options prices.” Thus, a low IV suggests that traders are not confident that the price of Bitcoin would move rapidly as we near the end of 2019. Supply-Demand and time value are the key factors in determining the Implied Volatilty’s value.

Implied Volatility is a key metric for pricing the Options contracts and is based on the supply/demand metric; the more the demand, the higher will be the IV value and vice versa. The current value of sub 60% is as low as the month of May when the Bitcoin price was hovering between the $5k – $8k mark. This was a time when people were not really bullish on Bitcoin as they were expecting the price to rise towards the end of the year.

However, if present metrics are to be considered, these traders are not very hopeful now either.

Other technical metrics also implied a further slump in the price of Bitcoin, and many have started to doubt if Bitcoin would ever touch the heights of its 2017 massive bull run which took its price near the $20k mark.


Aakash is a full-time cryptocurrency journalist at AMBCrypto covering primarily the US market. A graduate in Finance and Economics, his writing is centered around regulation and institutional investment within the cryptocurrency space. He is also an aspiring triathlete.
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