Bitcoin options markets are showing a low volatility expectation, something that has actually preceded sharp price action in the past.<\/p>\n
In its latest weekly report, on-chain analytics firm Glassnode<\/a> has talked about the latest trend in the Bitcoin Options At-The-Money Implied Volatility.<\/p>\n Implied Volatility (IV)<\/a> refers to an indicator that measures how volatile BTC is expected to be in the future, based on the pricing of Options contracts. At-The-Money (ATM) IV<\/a>, the version of the metric of interest here, specifically calculates this expectation for the contracts that have their strike price closest to the asset\u2019s current spot price.<\/p>\n The \u201cstrike price\u201d is the predetermined price at which the holder of an options contract can choose to buy (in the case of a call or bullish bet) or sell (put or bearish bet) the underlying asset.<\/p>\n Now, here is the chart shared by the analytics firm that shows the trend in the Bitcoin Options ATM IV for all expiry timeframes:<\/p>\n As displayed in the above graph, the Bitcoin Options ATM IV has been following a downtrend since a while now, indicating the traders aren\u2019t expecting near-term volatility.<\/p>\n If the past is anything to go by, though, BTC could go against these traders. \u201cHistorically, such subdued volatility expectations have often preceded sharp market moves, making them a potential contrarian indicator,\u201d explains Glassnode.<\/p>\n From the chart, it\u2019s visible that such a contraction in Bitcoin Options ATM IV also occurred back in 2023 and what followed back then was a bull rally for the cryptocurrency. It now remains to be seen whether volatility in either direction would also follow this compression.<\/p>\n