The US Securities and Exchange Commission’s (SEC) lawsuit against major cryptocurrency exchanges Binance and Coinbase has sparked an air of unease among Bitcoin (BTC)-savvy traders. No, an option-based implied volatility indicator found. This indicates that the lawsuit was expected and had already been factored in.
Christopher Newhouse, an independent trader in crypto-derivatives, said, “The biggest takeaway for me is that everyone has a shocking resurgence in implied volatility and some kind of new investment in long-term options. We are expecting a bid,” he said. “However, we see little such evidence, suggesting that volatility market players may be downplaying this.”
Regulatory concerns have been prevalent since the beginning of the year, and perhaps the market expected and priced in the SEC’s actions, he said.
Implied volatility (IV) is based on options data and reflects investors’ expectations of price volatility over a specified period of time. IVs are positively impacted by demand for options, which are derivative contracts that protect the purchaser from bullish or bearish fluctuations. A call option protects against an uptrend and a put option against a downtrend.
Rising demand for options and the accompanying rise in implied volatility often reflect heightened market caution and the potential for significant price moves in either direction. So far, Bitcoin’s implied volatility has remained modest.
Bitcoin’s 7-day annualized implied volatility climbed from 34% to 43% after the SEC filing, then pulled back to 40% and is up only 6% this week. The 30-day metric is up 4% from multi-month lows, while 3- and 6-month IVs have remained roughly flat, according to Amberdata.
“We’ve seen a brief uptick in front-end (short-term) IVs, so it’s safe to say there are no signs of panic,” said David Brickell, director of institutional sales at crypto liquidity network Paradigm. He told CoinDesk.
Griffin Ardern, a volatility trader at crypto manager Blofin, said the SEC’s action would do more damage to altcoins, or coins other than Bitcoin.
“IV is definitely up, but not by much, and it’s mostly focused on front-end (short-term) options,” Ardern told CoinDesk.
“One possible reason is that BTC and ETH are already accredited by the Commodity Futures Trading Commission (CFTC), and their derivatives have been traded on compliant exchanges such as the Chicago Mercantile Exchange (CME) for several years. However, the SEC’s prosecution has focused primarily on altcoins, many of which are classified as securities, and has relatively limited impact on BTC and ETH,” Ardern said.
In its lawsuit against Coinbase, the SEC said that Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Sandbox (SAND), Axy Infinity (AXS), Chiliz (CHZ), Internet The Computer (ICP), Voyager Token (VGX), NEAR Protocol (NEAR), NEXO, FLOW and DASH were mentioned and their prices dropped.
According to CoinDesk data, bitcoin has been trading between 3% and 5% daily in a narrow range between $25,300 and $27,400 since June 5. Ethereum has seen a similar range play between $1,800 and $1,900.
“When liquidity moves away from altcoins, it will move back to BTC, ETH and stablecoins,” said Ardern.
｜Translation: coindesk JAPAN
｜Editing: Toshihiko Inoue
｜Original: Bitcoin Traders Shrug Off US SEC’s Action Against Binance, Coinbase