Bitcoin Derivatives Volumes Drop to New Lows Amid Volatility Crush

Bitcoin derivatives are all about predicting future prices, and this generally needs prices to actually move in one direction or the other.

The recent market lethargy and weeks of stagnation have led to decreased activity on derivatives markers, according to Glassnode.

“Bitcoin prices are infamously volatile, however the market is currently experiencing an extreme volatility compression,” it stated.

Bitcoin prices are infamously volatile, however the market is currently experiencing an extreme volatility compression. Whilst options markets reflect this, it suggests that Bitcoin is either no longer infamously volatile… or volatility could be mispriced.

Find out more in the… pic.twitter.com/PdCzc3Y8XT

— glassnode (@glassnode) August 7, 2023

Low Market Volatility Dampens Derivatives

The on-chain analytics provider noted that the combined futures and options trade volume for the two assets is at or approaching all-time lows.

Bitcoin is currently seeing $19 billion in aggregate derivatives trade volume, whilst Ethereum markets have just $9.2 billion per day. These are less than the January lows in the depth of the crypto winter cycle.

It added that open interest (OI) in Bitcoin futures markets has also been flat at $12 billion over the last month. OI refers to the number of contracts that have yet to be settled. However, options markets have ticked up slightly and are now equal to futures in OI magnitude.

Futures are contracts that allow speculators to bet on a future price of BTC to be settled on a set date, whereas options contracts have flexible settlement dates and can be extended.

Implied volatility, which measures the market’s view of the likelihood of changes in prices, is also at historical lows. This suggests that market participants expect the inactivity to continue for a little while yet.

According to the ‘DeFi Investor’, the Bitcoin volatility index has reached an all-time low.

BTC Volatility Index reached a new all-time low.

The real challenge is not surviving downtrends, but enduring the boredom of a sideways market.

Stay strong frens. pic.twitter.com/009vsbTimI

— The DeFi Investor 🔎 (@TheDeFinvestor) August 7, 2023

Furthermore, the fear and greed index remains neutral, where it has been for the past month.

BTC Price Outlook

Crypto markets are unmoved for yet another day, with total capitalization hovering just above $1.2 trillion. It has remained flat at this level for the past seven weeks.

Bitcoin dipped below $29K during late trading on Aug. 7 but rapidly recovered to return to its sideways channel at $29,150 at the time of writing.