Last week, Arthur Hayes, the former CEO of the BitMEX cryptocurrency exchange, shared his belief that bitcoin (BTC) had reached its lowest point. However, he also noted that any upward movement in price is likely to be gradual.
Now, an indicator called the volatility risk premium (VRP) is confirming this view, signaling a market environment with relatively low volatility ahead. This could be seen as a positive development for long-term investors.
In terms of bitcoin’s market performance, it is currently valued at $62,552.88. This represents a slight increase of 0.5% compared to an hour ago, but a decline of 1.4% since yesterday. However, BTC’s current value is still 9.7% higher than it was a week ago.
The global crypto market cap is currently at $2.42 trillion, with a decrease of 2.28% in the past 24 hours. However, it has seen a significant increase of 103.59% compared to a year ago. BTC’s market cap stands at $1.23 trillion, indicating a BTC dominance of 50.99%. Meanwhile, stablecoins hold a market cap of $161 billion, representing a 6.65% share of the overall crypto market cap.
With this in mind, the VRP captures the phenomenon where the expected price volatility, as indicated by an asset’s option-induced implied volatility, tends to be higher than the actual realized volatility in the long run. This spread reflects the additional compensation that options sellers require due to the increased risks associated with uncertain future conditions and price fluctuations.
Data tracked by analysts at Bitfinex shows that the one-month VRP has significantly decreased from 15% to 2.5% since the bitcoin blockchain’s mining reward halving on April 20. The calculation of VRP relies on the difference between Volmex’s BVIV and VBRV, which measure the implied and realized volatility of bitcoin over a 30-day period.
Michaël van de Poppe, the founder and CEO of trading firm MNTrading, expressed frustration with the lack of clear direction in the market following bitcoin’s block subsidy halving in mid-April. He stated, “Bitcoin is gradually approaching the lower boundaries of the range to test the support.” The recent turbulence in the crypto exchange-traded fund (ETF) sector has left observers with differing opinions on the future.
The bitcoin halving on April 19 was eagerly anticipated by crypto investors. Historically, bitcoin halvings have resulted in significant surges in the crypto market. Despite the recent price decline, many expect this halving cycle to follow the same pattern.
In this event that occurs every four years, the bitcoin blockchain recently reduced the per block supply emission from 6.125 BTC to 3.125 BTC, effectively halving the rate at which bitcoin supply is expanding.
Experts believe that concerns over global debt and extensive fiscal spending in the U.S. will contribute to bitcoin’s potential for significant gains following the halving, similar to its previous record.
Although the one-month VRP for ether (ETH) has decreased from 18% to 8.5%, it is still relatively high compared to bitcoin. This suggests that traders perceive the future of ether to be somewhat uncertain.