Veteran Financial Analyst Joshua Lim Explains What Falling Implied Volatility Can Tell Us About Major Cryptos
Joshua Lim, head of derivatives at top-tier crypto broker Genesis Trading and former Circle exec, shares his take on volatility dynamics for Bitcoin (BTC) and Ethereum (ETH).
Hedge Funds Not Interested in Buying Bitcoin (BTC) in the 1940s
Mr. Lim took to Twitter to share his views on Bitcoin’s (BTC) implied volatility dynamics over the past few months. Implied volatility should be seen as an indicator of the market’s opinion of the likelihood of changes in the price of a given asset.
The analyst noticed that, as Bitcoin (BTC) and Ethereum (ETH) are changing hands in the middle of yearly price range ($25,000-$69,000 for Bitcoin; $1,900-$4,600 for Ethereum), large-scale players are not interested in buying.
As such, there is no major catalyst for Bitcoin (BTC) volatility active at this time. The implied volatility of Bitcoin (BTC) fell from 90 to 70 in less than two months.
This looks like the most radical retracement since early March 2021.
“Not scream buy”, but…
Historically, when the implied volatility metrics bottom out and start rising again, it’s a huge positive driver for the price of the asset. Major reversals were recorded in October 2020 and April 2021.
The entire picture does not “scream buy” for the analyst but still looks attractive in the mid-term perspective. Once the implied volatility metric rockets, it can almost double (reaching major highs at 120) in weeks.
Bitcoin, the flagship cryptocurrency, is changing hands at $42,790 (up 1.4% in 24 hours), while Ethereum (ETH) has added 1.24% and is trying to hold above the $3,300 level.
