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6 June 2023
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Bitcoin Options hold strong despite Fed’s despair

On 10 June the Federal Reserve’s latest policy update took the market by surprise, despite the speculations of near-zero interest rates for a coming couple of years. According to reports, the central bank elected to hold interest rates near zero on Wednesday and pledged to take in at least $80 billion in treasury and $40 billion worth of mortgage-backed securities each month to ease the market functioning. Although the decisions have been taken considering the tough economic conditions, the market was spooked by the pessimism.

The impact was such that the stock market once again felt the tremours of risks. Even though Nasdaq closed above 10,000 for the first time ever, the Dow and the S&P 500 fell for the second consecutive day. Dow closed down 1%, while the S&P 500 sipped by 0.5%. Although Bitcoin’s value started to march upwards and briefly touched $10k, it dipped as the sell-offs escalated in the following hours. BTC price fell by 8% within hours, however, buyers were quick to pull its price up. BTC dipped to $9,088 and was pushed to $9,388 within the next hour. The current price of BTC was $9,461.20 and irrespective of the dump appeared positive.

According to the data provider Skew, Bitcoin realized volatility dipped from 6.7% to 4.5% on June 11 as the price slumped. This level of realized volatility was not seen in the market since the sudden jump on 12 March.

Source: Skew

The confidence of the investors in the BTC Options also appeared to be increasing.  The BTC ATM Volatility Term structure was moving upwards, indicating the market was not showing signs of stress despite the Fed announcement and the fall. As the market turned confident, the implied volatility was close to hitting a monthly-low. A reducing IV has presented itself as a buying opportunity for investors, and the number of calls is increasing substantially and the top BTC Options volumes on Deribit and OKEx exchanges were calls.

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