Bitcoin traders have not been fazed by the U.S. Securities and Exchange Commission (SEC)’s crackdown on heavyweight cryptocurrency exchanges Binance and Coinbase (COIN), as options-based implied volatility metrics show. According to independent crypto derivatives trader Christopher Newhouse, 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. But I see little evidence of that, which suggests players in the volatility market might be shrugging this off. Regulatory concerns have been prevalent since the beginning of the year, and the market may have anticipated and priced in the SEC’s actions.
Implied volatility (IV) is based on options data and reflects investors’ expectations for price turbulence over a specific period. Bitcoin’s seven-day annualized implied volatility rose to 43% from 34% after the SEC news, and has since pulled back to 40%, a meager six-point increase for the week. The 30-day gauge has increased by four points from multi-month lows, while the three and six-month IVs have remained largely unchanged, according to Amberdata. David Brickell, director of institutional sales at crypto liquidity network Paradigm, said, We have seen a short-lived pop in the front-end [short duration] IV. So, there are no real signs of panic.
Volatility trader at crypto asset management firm Blofin, Griffin Ardern, said the SEC’s action is more damaging to alternative cryptocurrencies, or coins other than bitcoin. He noted that IVs have indeed risen, but the rise is not large, and it is mainly concentrated in the front-end [short duration] options. Ardern believes that the impact on Bitcoin and Ethereum is relatively limited because they 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.
Since Monday, Bitcoin has seen 3% to 5% daily price moves in a narrow range of $25,300 to $27,400, while Ether has seen a similar range play between $1,800 and $1,900. Ardern concluded that when liquidity leaves alternative cryptocurrencies, it goes back into BTC, ETH and stablecoins.