bitcoin is struggling to generate bullish momentum even as the key panic indicator retreats from its high earlier in the month and hints at renewed stability.
Bitcoin’s 30-day implied volatility, the indicator of fear or panic, which reflects investors’ expectations about price swings over 4 weeks, has fallen to an annualized 52%, according to data source Volmex. The drop has reversed the peak from earlier in the month, which saw the index rise from about 48% to nearly 100% as bitcoin fell to nearly $60,000.
The decline in volatility suggests that panic has subsided and that investors are no longer searching for options or hedging instruments as frantically as they were during the crisis.
Options are derivative contracts that offer insurance against price swings. A call option allows you to profit from rising price volatility in BTC, while a put option protects against price declines. Option demand influences implied volatility.
“Implied volatility has decreased and deleveraging is losing steam,” Bitfinex analysts said in an email to CoinDesk, highlighting the new stability and easing of panic.
Still, the price of bitcoin remains under pressure, trading at just under $68,000 at press time, a drop of 1.2% in the past 24 hours, according to data from CoinDesk. The sell-off earlier in the month failed near $60,000 on February 6, sparking a rally, but prices have not moved sustainably above $70,000 since then.
This speaks of weak demand.
“Funding rates have yet to show appetite for aggressive re-leveraging and derivatives markets support the view of a stabilization rather than a renewal of purchases,” Bitfinex analysts explained.
Perpetual funding rates are periodic payments exchanged between long and short traders in crypto perpetual futures contracts to keep the contract price anchored to the spot price. A positive rate implies that long positions (buyers betting on price increases) pay short positions (sellers betting on falls), indicating a more bullish positioning in the market. A negative rate suggests a bias towards short positions.
While implied volatility has decreased dramatically, funding rates on BTC perpetuals remain just above zero, a sign of slight bullish trends among traders, but nothing aggressive yet.
The institutional appetite has not been great either. U.S.-listed spot bitcoin exchange-traded funds have recorded a net outflow of $677.98 million this month, extending a three-month redemption streak, according to data source SoSoValue.
Macro offers hope
Battered bulls may pin their hopes on waning US inflation and lower real yields, which could offer a tailwind for risk assets and unprofitable assets like bitcoin.
Data released last week showed the consumer price index (CPI) slowed to 2.4% year-on-year in January from 2.7% in December, strengthening hopes of at least two 25 basis point rate cuts by the Federal Reserve this year.
The real or inflation-adjusted yield on the 10-year US Treasury bond fell to 1.8%, the lowest level since December 1. A drop in real yield typically leads investors to increase exposure to assets like bitcoin.
“Lower real yields reduce the relative disadvantage of non-yielding assets like Bitcoin, while a weaker dollar supports global liquidity conditions,” Bitfinex analysts noted.
