Bitcoin Options Volatility, Futures Basis, and the 2020 Rally Comparison
Summary
The article compares Bitcoin market conditions in late 2023 with the rally in late 2020, using spot returns, options implied volatility, futures basis, and realized volatility. It reports that implied volatility was near its 2023 high amid call buying, while remaining far below the level observed during the 2020 surge. Futures basis was also described as lower than at the start of 2020 relative to the risk-free rate, which the author interprets as potential buying power remaining on the sidelines rather than a direct forecast of higher spot prices.
The piece highlights a widening variance risk premium as implied volatility rose relative to low realized volatility, and a higher implied volatility kink for January options around the expected spot Bitcoin ETF decision. It frames the premium as either expensive option demand or anticipation of greater volatility. These are market interpretations, not confirmed outcomes; the comparison and quoted market measures do not prove a future rally or volatility event.
Key ideas
- The article compares 2023 Bitcoin returns and derivatives positioning with conditions in 2020.
- Call buying was cited as a driver of elevated implied volatility in 2023.
- The futures basis was lower than in 2020 relative to the risk-free rate.
- The widening gap between implied and realized volatility is described as a variance risk premium.
- Elevated January implied volatility reflected uncertainty around the spot Bitcoin ETF decision.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.