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The U.S. Securities and Exchange Commission's (SEC) recent enforcement actions against major cryptocurrency exchanges Binance and Coinbase (COIN) did not appear to unsettle knowledgeable bitcoin (BTC) traders, as indicated by implied volatility metrics based on options. This suggests that the lawsuits were anticipated and factored into the market prices.
"The biggest takeaway for me is everyone has been looking for a catalyst to shock implied volatility back to life and see some sort of renewed bid for longer-dated options," said Christopher Newhouse, an independent crypto derivatives trader. "But I see little evidence of that, which suggests players in the volatility market might be shrugging this off."
Given the prevailing regulatory concerns throughout the year, it is likely that the market had already foreseen and factored in the SEC's actions, as noted by the speaker.
Implied volatility (IV) is determined by analyzing options data and represents the market's anticipation of potential price fluctuations within a given timeframe. It is influenced by the demand for options, which are financial instruments that provide investors with protection against both upward and downward movements in prices. A call option safeguards against upward price surges, whereas a put option safeguards against downward price declines.
The growing interest in options and the consequent rise in implied volatility frequently indicate a greater caution within the market and the possibility of heightened price volatility in either direction. However, the increase in implied volatility for Bitcoin has been relatively modest thus far.
Following the SEC news, Bitcoin experienced a surge in its seven-day annualized implied volatility, climbing from 34% to 43%. However, it subsequently retraced to 40%, representing a modest six-point increase over the course of the week. Amberdata reports that the 30-day measurement has seen a four-point uptick from its previous multimonth lows, whereas the three and six-month implied volatilities have remained relatively stable.
"We have seen a short-lived pop in the front-end [short duration] IV. So, there are no real signs of panic," David Brickell, director of institutional sales at crypto liquidity network Paradigm, told CoinDesk.
Griffin Ardern, a volatility trader at the crypto asset management firm Blofin, expressed that the SEC's move has a more detrimental impact on alternative cryptocurrencies, which refer to coins other than bitcoin.
"IVs have indeed risen, but the rise is not large, and it is mainly concentrated in the front-end [short duration] options," Ardern told CoinDesk.
"The possible reason is that BTC and ETH have already been certified by the U.S. Commodities and Futures Trading Commission, and their derivatives have been traded on compliant exchanges such as CME for several years, while the SEC's prosecution mainly targets altcoins, and many altcoins identified as securities, the impact on BTC and ETH is relatively limited," he said.
In its lawsuit against Coinbase, the SEC listed several cryptocurrencies, including Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Sandbox (SAND), Axie Infinity (AXS), Chiliz (CHZ), Internet Computer (ICP), Voyager Token (VGX), NEAR protocol (NEAR), NEXO, FLOW, and DASH, resulting in a downward pressure on their prices.
CoinCryptoUs data reveals that Bitcoin has been displaying daily price movements ranging from 3% to 5% since Monday, confined within a tight price bracket of $25,300 to $27,400. Likewise, Ether has demonstrated a comparable pattern, fluctuating within the range of $1,800 to $1,900.
"When liquidity leaves alternative cryptocurrencies, it goes back into BTC, ETH and stablecoins," Ardern said.
Source Coindesk
