Bitcoin (BTC) volatility has been decreasing since its halving in April, which indicates a shift towards price stability, according to the latest “Bitfinex Alpha” report.
Bitcoin’s implied volatility (BVIV) plummeted by 18%, from 74.5% to 56.4%, signaling a market adjustment to the new supply dynamics. Ethereum’s implied volatility (EVIV) also fell by 9.9%, from 61.9% to 52%, despite a slight uptick in price.
Bitcoin’s implied volatility. Image: Bitfinex/TradingView
The reduction in volatility risk premiums (VRP) for both Bitcoin and Ethereum suggests a recalibration of market expectations. Bitcoin’s VRP dramatically decreased to 2.5% from 15%, with Ethereum’s VRP following suit, dropping to 8.5% from 18%. This narrowing of the VRP points to a realignment of investor sentiment towards a more predictable post-halving market environment.
The changes in spot-volatility correlations for Bitcoin and Ethereum further underscore this trend, with Bitcoin’s one-week spot-vol correlation decreasing to -20% from -56%. The market’s response to the halving indicates a lessened concern for future uncertainties and a consensus that volatility may be lower than previously expected.
BTC VRP (red), ETH VRP (orange) and VRP difference (green). Image: Bitfinex/TradingView
Despite the bearish trajectory Bitcoin has taken since reaching a new all-time high in March 2024, the Exchange Whale Ratio suggests that a stabilization of selling pressure could be imminent. The Realised Loss breakdown reveals that short-term holders are currently the main drivers of selling pressure. However, the Short-Term Holder MVRV (STH-MVRV) ratio is at 0.96, hinting at a potential market recovery as selling pressure subsides.
Moreover, the Bitcoin Fundamental Index (BFI), an index that assesses various aspects of Bitcoin’s network health also points to a possible upward trend, as network growth indicators surpass levels seen at past market bottoms. The market’s direction now heavily relies on liquidity expectations set by upcoming FOMC decisions, Bitfinex’s analysts conclude.
