What to know:
- BTC options indicate a price movement expectation of about ±2.0%.
- Traders are bracing for possible declines if Powell’s speech is unexpectedly neutral, increasing interest in put options.
As Federal Reserve Chairman Jerome Powell prepares to deliver his address at the Jackson Hole Economic Policy Symposium, many are pondering how much Bitcoin prices might fluctuate. Early analyses suggest moderate volatility is to be expected, rather than the sharp swings that often precede such notable events.
“BTC options are factoring in roughly a ±2.0% movement during Powell’s speech,” stated Pulkit Goyal, head of trading at Orbit Markets, a firm specializing in crypto options and complex derivatives.
Market observers often utilize options pricing, different strike prices, expirations, and implied volatility to anticipate possible price shifts. Implied volatility reflects the market’s forecast on how much the actual asset might fluctuate within a designated timeframe.
The same day, Volmex’s one-day implied volatility index climbed to an annualized 49%, marking the highest level since May 26 and signaling a 24-hour price variation of about 2.5%. This rate is noticeably above the normal daily variation of 1.18% seen over the past month.
It is important to note that volatility can cut both ways; the anticipated price movements indicated by options and implied volatility may rise or fall. However, there is a palpable sentiment among traders that downward volatility may be more probable should Powell’s tone veer toward a more neutral stance, diverging from the widely held expectations of hints at potential rate cuts. Consequently, a number of traders have opted to purchase put options as a hedge against such a scenario.
“If his comments lean more toward a balanced viewpoint than a dovish one, the markets could face a correction, leading to heightened demand for downside protection,” said Goyal, elaborating on trading data that reveals an overnight skew of 25-delta risk reversals currently marking 6 more puts than calls.
Powell is set to provide his insights on Friday morning during the Federal Reserve’s annual gathering at Jackson Hole.
