Key Highlights

• Both implied and realized volatility indices hit six-month highs as Bitcoin reached a record above $109,000.
• Following a surge in short-term speculation, Bitcoin options open interest increased by 44,000 BTC ahead of President-elect Donald Trump’s inauguration.

Bitcoin (BTC), the major cryptocurrency by market cap, surged past $109,000 on Monday, causing both the implied and realized volatility to reach levels not seen since August’s yen carry trade unwind.

• Realized volatility, which reflects historical price fluctuations, reached 67 on the Bitcoin Volatility Index (BVOL).
• The implied volatility index climbed to a peak of 71, reflecting market expectations of future price changes derived from options pricing. Both indices recorded approximately 2% growth on this day.

“The positive correlation between Bitcoin’s price and implied volatility remains intact. It’s a sign traders are chasing options, especially calls, as risk reversals indicate that calls are trading at a premium relative to puts that offer downside protection,” stated Omkar Godbole, a markets analyst.

Moreover, the pricing of short-duration calls is higher than for longer ones, a rarity that suggests strong short-term bullish sentiment, per Andre Dragosch, Bitwise’s European head of research. Increased open interest in options signifies heightened speculative activity.

Traders are anticipating significant price momentum following potential plans from President-elect Donald Trump regarding a strategic Bitcoin reserve.

Mitch Galer, a trader at GCR, mentioned, “Trump’s influential use of social media, historically impactful on markets, is creating uncertainty for the upcoming days. Speculation surrounding crypto reserves and potential deregulation is generating optimism in crypto markets for further gains this year.”