Bitcoin Tranquility: Market Volatility Hits Two-Year Low Despite FTX Contagion

1. Bitcoin’s annualized seven-day implied volatility has declined to a two-year low of 38.2%.
2. Analysts are scrambling to explain the perplexing tranquility in the market.
3. Markus Thielen, head of research and strategy at Matrixport, believes the macro outlook is extremely constructive and that the FTX headlines will have less impact on the market.

The bitcoin (BTC) market has been surprisingly calm despite lingering FTX contagion fears and macroeconomic uncertainty. Many analysts are scrambling to explain the perplexing tranquility in the market. The annualized seven-day implied volatility (IV) of bitcoin, or the options market’s forecast of a likely movement in the underlying asset, has declined to a two-year low of 38.2%, according to data source Amberdata.

This metric, often equated with the degree of uncertainty or fear, peaked at 145% on Nov. 9 and has been decreasing since, even as the FTX contagion spread and experts feared a wave of miner bankruptcies.

Markus Thielen, head of research and strategy at Matrixport, believes that the macro outlook is extremely constructive, which is contributing to the lower volatility. He also believes that the FTX headlines will have less impact on the market, due to investigations doing the dirty work in the background and China’s recent decision to relax inflationary COVID-19 restrictions.

Bitcoin’s price has risen 9% to $17,700 since crypto lender BlockFi filed for bankruptcy on Nov. 28 and has managed to eke out 3% gains for the week despite Binance’s clients withdrawing large sums of their coins early this week. This indicates that traders have moved on from the FTX collapse and have bought options to hedge against future market volatility.

The current low volatility of the bitcoin market has been perplexing to many analysts. However, with the macro outlook being extremely constructive, the FTX headlines having less impact on the market, and traders buying options to hedge against future market volatility, it is not surprising that the bitcoin market is relatively calm.