Crypto market could face more volatility as VIX hits highest level since COVID-19 market panic, Abra analyst says
The cryptocurrency market was first to react to the macroeconomic meltdown sweeping through global markets over the weekend, with one analyst forecasting more volatility is ahead.
“I expect implied volatility to be sustained at an elevated level in the cryptocurrency markets until the macro side calms down,” Bohan Jiang, Abra’s Head of OTC Options Trading, told The Block.
Jiang added that the majority of the options market participants were not prepared for the latest macroeconomic downturn.
“There had not been any demand for downside protection in the options market in recent weeks, with traders mainly focused on bullish catalysts: the market was positioned in topside calls, with bitcoin implied volatility going up to the high 60s ahead of Trump’s Bitcoin
BTC -1.33% Nashville speech, and ether implied volatility increasing to the low 70s ahead of the launch of spot Ethereum exchange-traded funds (ETFs), as bullish sentiment became priced in,” Jiang added.
The options trader described a derivatives market caught off guard by the recent macroeconomic downturn, which has seen the Chicago Board Options Exchange’s CBOE Volatility Index (VIX) soar. In the past 24 hours, the VIX has surged to over 65 points, which is the highest it has been since the market panic at the beginning of the COVID-19 pandemic.
“The crypto options market had sold vol aggressively after both events resulted in spot selling off back into its past range, despite the fact that various macro events had already caused the VIX to grind higher over the past week,” Jiang added.
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