Bitcoin volatility hits 11-month low as demand for directional bets fades

Bitcoin’s volatility outlook in the options market has fallen sharply as BTC has traded in a narrow $62,000-$66,000 range since early last month, CoinDesk analyzed. CoinDesk said the Volmex BVIV Index, which shows annualized 30-day implied volatility for BTC options, fell to 35.59% over the weekend, the lowest level since September last year. That contrasted with February, when the index climbed above 90% as BTC plunged from $90,000 to around $60,000. Griffin Sears, head of derivatives at FalconX, said the main driver of lower volatility was a supply-demand imbalance in the options market. Sears said demand has evaporated for directional options, or bets on a large move in either direction, while supply has remained elevated. Although every options contract has both a buyer and a seller, Sears said the high supply means more investors are writing and selling options to market makers. Sears added that BTC miners and companies in particular are increasingly using a strategy of repeatedly selling call options on their BTC holdings to generate additional income, and that the steady supply of options selling has helped push implied volatility lower. He also pointed to weaker trading activity and a sluggish spot market, adding that as realized volatility based on actual BTC price moves declines, implied volatility, which reflects the market’s expectations for future swings, is also falling.