Recent data from Skew shows that the implied volatility of Bitcoin Trader, Bitcoin Billionaire, Bitcoin Profit, Bitcoin Era, The News Spy, Immediate Edge, Bitcoin Revolution, Bitcoin Evolution, Bitcoin Circuit, Bitcoin Code plummeted after yesterday’s halving. In general, volatility is at the heart of any professional trader, as it measures daily average price movements and provides information on market conditions.
As previously reported by Cointelegraph, the Bitcoin halving event tends to increase volatility due to its significant uncertainties. Traders anticipated that the price would rise or fall during and after the event, thus the short term peak. At the close of this edition, the metric has returned to previous levels.
How to Capitalize on Bitcoin Halving Volatility Using BTC Options
Uncertainties can generate volatility
Over the past few months, analysts have considered the narrative that there could be a significant drop in the hash rate after halving. Supposedly, this would be driven by miners closing their ASIC-based operations due to the cut of Bitcoin’s block subsidy to 6.25 BTC from the previous 12.5 BTC.
To date, there is still valid concern about the beginning of a „death spiral,“ which would force large miners to sell reserves, and possibly even bankrupt those who are most leveraged. A possible driver of this bankruptcy would be the fact that the minimum income for the miners has been reduced.
Cryptcoin traders explain what caused Bitcoin’s price to fall to $3,000
Note that transaction fees rarely exceed 5% of miners‘ earnings, which is primarily made up of this block grant reward. Halving the mining industry’s $5 billion revenue can produce wavelengths with unexpected results, including hard bifurcations.
Traders rely on implied volatility, and halving impacted this metric
There are two ways to measure volatility, either by using historical data or by analyzing current option market premiums. It is important to note that historical data has a disadvantage when approaching price-sensitive events, as it favors past movements.
For Bitcoin, volatility had been in a continuous decline from its peak after Bitcoin’s collapse to USD 3,600 on March 12. Entering May, Bitcoin implied volatility stabilized around 80% as halving approached.
The option markets present a perfect way to measure potential price movements because they depend on the influence of traders. The higher premiums demanded by option sellers reflect a greater fear of incoming volatility.
As shown in the table below, ‚at the money‘ options mean that the exercises used to calculate are in the money, which means USD 9,000 for the current underlying Bitcoin price (BTC) of USD 8,900.