Bitcoin Market Insight: Volatility and Regulatory Landscape Shape the Game

Volatility persists as Bitcoin hovers below $40,000.
BTC spot ETF impact wanes; Grayscale dynamics and compliance in spotlight.
Key dates await, including SEC hearings and central bank decisions.

Popular Bitcoin and crypto traders account delves into the current market nuances. Bitcoin recently dipped below the $40,000 mark, accompanied by a recovery in short-term implied volatilities (IVs). The overarching Volatility Risk Premium (VRP) has seen an uptick, and the Skew curve is notably favoring put options.

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Examining the option data reveals a presence of short-term panic orders, signaling an increase in bearish forces. However, the market remains finely balanced between long and short positions, setting the stage for an intense battle.

Looking ahead to this week’s market outlook (1/22-1/28), the impact of the BTC spot ETF is waning. The focal point shifts to Grayscale’s selling pressure and the influx of new investors, particularly during ETF trading sessions.

Post-ETF, compliance regulations resurface, with the Coinsecurity hearing demanding heightened investor attention. On the macro front, few data points are expected, exerting minimal influence on the crypto space.

Key events this week include the European Banking Authority’s consultation on crypto entity assessment and a US SEC court hearing with Binance on Tuesday. Wednesday sees the Bank of Canada’s interest rate decision, while Thursday features the ECB’s main refinancing rate, US initial jobless claims, and the SEC’s resolution on Ethereum spot ETF conversion. As Friday approaches, focus sharpens on the US core PCE price index for December.

In dissecting the market’s recent developments, the volatility induced by BTC spot ETFs is subsiding. Both major term options IV and RV have witnessed significant declines, aligning with earlier predictions. Notably, short-term IV has plummeted to 40%, signaling a resurgence in the cost-effectiveness of long volatility. Investors are advised to pay attention to podcasts and anticipate strategic moves from major players.

Additionally, in the crypto interest rate market, rates remain at a low watermark, prompting recommendations for high-interest lending orders in the initial weeks. Picking up short-term interest rates, however, proves to be a challenging endeavor.

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Lauren Cole

A focused and vigilant storyteller for all things blockchain and cryptocurrency. Besides consuming every piece of literature about the metaverse, she can often be found at industry convections looking for the latest scoop.