Bitcoin Volatility Breakout in June?

KEY TAKEAWAYS

  • Bitcoin’s 30-day volatility has reached a 3-month low due to the lack of a clear directional bias in the market.
  • Volatility may pick up as more than $1 billion in Bitcoin options will expire on 26 June.

As we approach the end of the first half of the year, the crypto community is gearing up for radical changes from various aspects. 

One of the fundamental changes is volatility. Bitcoin’s 30-day realized volatility has now fallen to 55.7% on 21 June, the lowest level since 6 March.

Source: Skew

A horizontal comparison shows that Bitcoin’s volatility has fallen below oil and emerging currencies, and is almost on par with the U.S. real estate. The decline may be associated with the lack of clear directional bias in the market, as Bitcoin resumes range trading since the mining reward halving on 11 May. 

Source: Woobull

Deviation from the Trend

The time-series graph below presents a holistic overview of Bitcoin’s historical volatility, which helps to put recent changes in perspective.  

Source: MarketWatch

The overlay of realized volatility with changes in BTC price shows that Bitcoin has made a quick comeback from a drastic dip to below $4000 and established a pattern of consistent growth. Conversely, the 30-day realized daily standard deviation exhibits a gradual but downward trend into June. 

Source: MarketWatch

The implied volatility also experienced a steady decline since reaching a local peak in March due to a drastic drop in price. The daily implied volatility is nearly halved from 6% in late March to the current 3.6%, suggesting that the market has entered a relatively stagnant phase in June. 

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Source: Skew

A Breakout in the Near Future?

According to Kraken’s recent volatility report, there is a prevailing tendency of increased volatility, indicating shifting trends in the crypto market going into June. The Kraken report states that June is known to be more volatile than May. The trend has been pronounced since 2015, with volatility percentage consistently increasing in June. 

Source: Kraken

The promise of breaking away from the current stagnancy seems to be gradually waning as the price continues to stagger within the trading range.

However, volatility may pick up as the month end draws near. The looming Mt.Gox settlement date aside, we expect over $1 billion in BTC options to expire on 26 June, which may sway BTC’s price either way but inevitably create a substantial surge in volatility. 

Source: Skew