Bitcoin options positioning anticipates summer slowdown, analyst says

Bitcoin BTC +0.66% derivatives traders are positioning themselves for a summer lull in market activity, according to an analyst.

"Summers are usually low volatility periods, and traders are starting to position accordingly based on their bias," Bitfinex Head of Derivatives Jag Kooner told The Block.

According to Kooner, bitcoin implied volatility has dropped significantly since mid-April. This can also be seen in charts from The Block's Data Dashboard, which show the implied volatility of bitcoin at-the-money options falling from over 77% to under 60% for one week, one month and multi-month expires.

The implied volatility of ether ATM options has decreased to a similar extent as that of bitcoin IV since mid-April.

According to Cube.Exchange CEO Bartosz Lipiński, the ebbing of ether IV is a sign that traders expect price swings to calm a bit as they await clarity on ether’s regulatory situation in the U.S. "Typically, when there is uncertainty, traders will go risk-off to cash and sit on the sidelines, and it would not surprise me if a similar situation is occurring with ether," Lipiński told The Block.

The Cube.Exchange CEO added that due to the uncertainty surrounding ether's status in the U.S. — whether it is deemed a security or not — many traders are likely to either remain on the sidelines or explore opportunities elsewhere until the situation is clarified.

However, Lipiński stressed that in the summer, when trading volumes are lower, volatility can increase due to liquidity gaps in the market. "Summer can be a relatively quiet period, it often is in equities markets, but one only needs to look at 2017, DeFi summer, and the last major bull run to see the impacts of lower liquidity on relatively bullish crypto markets," he added.

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