Crypto options exchange Deribit’s future-looking Bitcoin (BTC) volatility index — used as a crypto fear gauge of sorts — has reportedly reached its lowest level in two years, indicating a possible lack of price turbulence for Bitcoin in the near future.
On July 24, the crypto derivatives analytics platform Greeks Live noted that the volatility index for Bitcoin and Ether (ETH) fell to a multi-year low of 37%.
In addition, the current implied level of volatility has fallen to the lowest level in crypto history according to the DVOL algorithm, it added.
The Dvol (Volatility Index) for BTC and ETH fell to 37%, the lowest level in history since two years ago, and the current Implied Volatility level, as projected by Dvol’s algorithm, fell to the lowest level in crypto history.
Continued low liquidity has severely depressed… pic.twitter.com/GdWE4GHXZw– Greeks.live (@GreeksLive) July 24, 2023
DVOL is the Derivative Implied Volatility Index. It provides an indication of the expected volatility for a crypto asset over the next 30 days by analyzing option activity. In simple terms, the index can
Greeks Live noted that continued low liquidity has severely lowered the implied volatility (IV) level for Bitcoin.
This suggests that derivatives traders are not confident that there will be any major movements in the crypto markets in the short term and the lack of volatility is likely to continue, it said.
“It is an indisputable fact that the overall volatility of cryptocurrencies is decreasing, which will inevitably force the implied volatility of cryptocurrencies to continue to new lows.”
Related: Low Volatility in Cryptocurrency Markets: A Curse or an Opportunity?
Other analysts using different metrics echoed the sentiment. On July 24, crypto analyst Josh Olszewicz observed that Bitcoin’s weekly Bollinger Bands contracted to record levels. “These are officially the tightest bbands [Bollinger Bands] it’s on a weekly timeframe,” he said.
Bollinger Bands are a type of statistical chart that depicts asset prices and volatility over time consisting of a central trend line with two outer bands that are two standard deviations apart.
Crypto markets have been rangebound since mid-March with total capitalization hovering around $1.2 trillion. There is very little deviation from this level except for a brief peak in mid-April and an equally brief trough in mid-June.
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