Traders in the Bitcoin options market are currently factoring in low implied volatility, yet on-chain data indicates a potential for significant price fluctuations. According to the latest weekly report by analytics firm Glassnode, the volatility risk associated with Bitcoin is being analyzed through on-chain metrics.
One key indicator highlighted by Glassnode is the Realized Supply Density, which illustrates how concentrated Bitcoin's supply is around its current market price. A high value for this metric suggests that a substantial number of investors have engaged in buying near the asset's latest price point. Glassnode explains, "In such environments, even modest price fluctuations can impact a wide range of investors, often intensifying market sensitivity and increasing potential volatility."
The report includes a chart showing that the Bitcoin Realized Supply Density has seen an increase over the past few weeks, indicating that accumulation has occurred around the current price levels. Glassnode notes, "This concentration heightens the likelihood of significant reactions to price movements, thereby raising short-term volatility risk."
Despite the indications of rising volatility from on-chain data, options traders seem less convinced, as the At-The-Money Implied Volatility (ATM IV) has been declining. This metric reflects traders' expectations regarding Bitcoin's volatility over a specified timeframe, based on the pricing of options contracts closest to the current market price.
A chart illustrating the trend of Bitcoin Options ATM IV across various expiration dates reveals a downward trajectory, suggesting that traders do not anticipate high volatility for Bitcoin in the near future. Glassnode remarks, "Historically, such complacency in volatility pricing has often acted as a counter-trend signal, preceding periods of increased volatility."
With on-chain data pointing towards a potential rise in volatility and this counter-trend signal emerging simultaneously, the future movement of Bitcoin remains to be seen. As of now, Bitcoin is trading at approximately $108,800, reflecting a rise of over 3.5% in the past week.
