As Bitcoin soars, breaking above a key psychological level and igniting a wave of longs, one trader now says BTC Call Options are more expensive than Put Options and that Implied Volatility has drastically risen at the back of a spot-driven rally.
Because of this shift, he now pours cold water on the heating market saying traders are angling for a pullback to the $7,600-800 zone before bidding.
At the time of press, BTC was trading at $8,350 against the USD.
Implied Volatility and BTC Price
The trader also added that the rise of Bitcoin stems from the actual buying of the coin, and not the reshuffling from altcoins. Supporting this is the marginal increment in BTC market share from 66% in December 2019 to roughly 68% at press time.
“Looking at funding rates, derivatives and spot volumes — it’s clear this was a spot driven rally. IVs have picked up dramatically and front month skew has flipped neg (calls more expensive than puts now). Everyone is calling for a pullback, and wants to bid 7600-7800.”
Looking at funding rates, derivs and spot volumes — it’s clear this was a spot driven rally. IVs have picked up dramatically and front month skew has flipped neg (calls more expensive than puts now). Everyone is calling for a pullback, and wants to bid 7600-7800.
— Avi (@AviFelman) January 8, 2020
Implied volatility (IV) reflects changes in price and while it doesn’t provide any projections to the future, it is still an important metric especially in Bitcoin Options trading.
According to a Deribit definition, Implied Volatility is the “expected future volatility of the BTC price that is implied by option prices (premiums).”
Analysts can use it as a guide to determine the likelihood of volatility within a period by tracking the premiums/discounts of call/put Options.
Bitcoin Demand from Souring Geopolitics
Judging from fundamentals, Bitcoin is directly reaping benefits from geopolitical tensions and the frosty relationships that could spark a way between the US and Iran.
Earlier today, there were reports that several rockets were fired from Iranian territory to a US Airbase in Iraq. Further reports added that the US President Donald Trump was closely monitoring the situation from the White House.
In the undesired event of war, safe haven assets and currencies including Bitcoin, Gold, Yen and Treasuries will likely benefits as investors move their capital from assets/securities deemed to be safe havens. Already, not only is BTC rallying but gold is trading at a 7-year high much to the delight of gold bugs