Key Points
- Bitcoin derivatives traders are preparing for a potential summer slowdown in market activity.
- Ethereum’s implied volatility has also decreased, indicating traders are expecting less price fluctuation.
Bitcoin derivatives traders are seemingly expecting a quieter summer in terms of market activity. This assertion comes from an analysis of the market’s positioning.
Jag Kooner, the Head of Derivatives at Bitfinex, has noted that summers typically experience lower volatility. He adds that traders are starting to align their positions with this expectation.
Market Volatility Trends
Since mid-April, there has been a significant drop in the implied volatility of Bitcoin. This is evidenced by the decrease in the implied volatility of Bitcoin’s at-the-money options, which fell from over 77% to under 60% for one-week, one-month, and multi-month expiries.
The implied volatility of Ethereum’s at-the-money options has seen a similar decrease. This suggests traders are anticipating less price movement as they wait for further clarity on Ethereum’s regulatory status in the U.S.
Impacts of Regulatory Uncertainty
Bartosz Lipiński, the CEO of Cube.Exchange, believes that this decrease in implied volatility is a sign that traders are adopting a more cautious approach due to regulatory uncertainty. He suggests that many traders, unsure of whether Ethereum will be classified as a security or not, are likely to hold back or seek other opportunities until the situation becomes clearer.
However, Lipiński also points out that lower trading volumes typically seen in the summer can lead to increased volatility due to liquidity gaps in the market. He cites the effects of lower liquidity on bullish crypto markets, as seen in 2017 and during the DeFi summer.
