Bitcoin’s annualized 30-day historical or realized volatility surged to nearly 60% towards the end of last week, surpassing ether’s 30-day realized volatility by close to 10 percentage points.
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The discrepancy between BTC and ETH’s 30-day historical volatility indices expanded to nearly 10 percentage points by the end of last week, marking the widest gap in at least a year, as reported by data from Kaiko.
Despite Bitcoin’s reputation for stability compared to other cryptocurrencies, recent trends have shown heightened volatility, with Bitcoin exhibiting greater fluctuations than ether.
Bitcoin’s annualized 30-day historical volatility reached almost 60% late last week, outpacing ether’s 30-day realized volatility by nearly 10 percentage points. This discrepancy represents the largest spread observed in at least a year, according to data compiled by Kaiko. Historical volatility serves as a metric for measuring price turbulence within a specific timeframe.
The positive shift in the bitcoin-ether volatility spread occurred weeks after the U.S. Securities and Exchange Commission (SEC) approved nearly a dozen spot bitcoin exchange-traded funds (ETFs), enabling traders to gain exposure to the cryptocurrency market without direct ownership. Subsequently, market focus has been primarily on the performance of these spot ETFs, with net inflows contributing to increased volatility in bitcoin and the wider crypto market. Meanwhile, diminishing prospects of the SEC greenlighting an ETH ETF by May have dampened enthusiasm among ether traders.
Another factor potentially contributing to heightened volatility in bitcoin is the forthcoming reward halving event within the Bitcoin blockchain. Scheduled for April 21, this event will reduce the block reward paid to miners from 6.25 BTC to 3.125 BTC, effectively halving miners’ revenue. ByteTree estimates the current annual miner revenue at $26 billion. The prevailing consensus views the halving as a bullish event, as it reduces the rate of supply expansion, potentially leading to a supply-demand imbalance favoring price appreciation, provided demand remains steady or strengthens. Previous halvings, occurring in November 2012, July 2016, and May 2020, have historically coincided with significant price rallies and the establishment of new record highs for Bitcoin.
Notably, Bitcoin has already surpassed its previous bull market peak of approximately $69,000 weeks ahead of the upcoming halving event, adding an extra layer of excitement for traders.
According to Greg Magadini, director of derivatives at Amberdata, the current bullish sentiment preceding the halving event could pave the way for a “sell-the-news” pullback post-event.
“The current positioning being so extended is setting the market up for a VERY interesting ‘sell-the-news’ halving cycle play,” Magadini remarked in the weekly newsletter. “Should there be a real pullback, we stand to see excessive ∆1 [futures] OI become liquidated, volatility RR-skew to favor puts and a collapsing basis.”
Magadini also pointed out the pricing of the halving event in the bitcoin options market.
“If we look at the options market, we see an interesting structure. A steep [IV] Contango before 4/26 and a high forward volatility kink for the 4/26 expiration. The options market is pricing in the halving event as well,” Magadini noted.
