might be diminishing in a quality that’s long been a sore spot for criticism: volatility. One critical gauge shows the cryptocurrency’s expected price swings are now at their lowest point in three months.
The cryptocurrency’s implied volatility, or expectations for price turbulence, declined to an annualized 75% early Monday, based on calculations using options premiums with a one-month horizon. That’s the lowest since Dec. 25, according to data provider Skew. They peaked above 145% in mid-January.
“The declining trend suggests that markets are expecting sideways price action,” Denis Vinokourov, head of research at trading sentiment data provider Trade the Chain, told CoinDesk in a Telegram chat.
Bitcoin is currently stuck in a narrowing price range, with both bulls and the bears unwilling to lead, as seen below.
Vinokourov expects a “pickup in downside protection flow,” given the lack of clear visible upside.
In plain English, traders could buy put options amid signs of bull fatigue. A put option is a derivative contract that gives the purchaser the right but not the obligation to sell the underlying asset at a predetermined price on or before a specific date.
At press time, one-, three-, and six-month put-call skews, which measure the cost of puts relative to calls, are at negative values, indicating greater demand for call options or bullish bets.