Veteran Financial Analyst Joshua Lim Explains What Falling Implied Volatility Can Tell Us About Major Cryptos
- Hedge Funds Not Interested in Buying Bitcoin (BTC) in the 1940s
- “Not scream buy”, but…
Joshua Lim, Head of Derivatives at Genesis Trading, a leading crypto brokerage and former Circle executive, shares his views on the 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.
1/ Implied long-term BTC and ETH theft hit multi-year lows. what is causing this and where do we go from here? a wire : pic.twitter.com/sIhZq6Aky8
—Joshua Lim (@joshua_j_lim) January 15, 2022
The analyst noticed that, as Bitcoin (BTC) and Ethereum (ETH) change hands in the middle of the annual price range ($25,000 to $69,000 for Bitcoin; $1,900 to $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 drastic 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 whole picture doesn’t “cry buy” to the analyst, but still looks attractive from a medium-term perspective. Once the implied volatility metric spikes, it can nearly double (reaching major highs at 120) within 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.