Bitcoin, Why Isn't It Shaking? The Reason Its Volatility Hit a 7-Month Low

▲ Bitcoin (BTC)/AI Generated Image ©

Even amidst ongoing Middle East risks and inflation concerns, Bitcoin's volatility has actually dropped to its lowest level in 7 months. Analysts suggest that Bitcoin is gradually transforming into a 'stable asset' due to a combination of institutional capital inflows and changes in market structure.

According to investment media FXStreet on May 22 (local time), Bitcoin's (BTC) 30-day annualized implied volatility index (BVIV) fell to 38%, the lowest since October last year. A decrease in implied volatility means market participants anticipate a lower likelihood of sharp price fluctuations in the future.

Silian Tang, co-CEO of Monarq Asset Management, stated, "Bitcoin's volatility is rapidly decreasing," citing the easing of Middle East geopolitical risks and Strategy's aggressive Bitcoin purchases as key factors. He explained that Strategy and its preferred stock product, STRC, are effectively acting as a structural support line for the market's bottom, thereby reducing downward volatility.

In addition, institutional investors' option selling strategies have also contributed to suppressing volatility. The so-called 'call overwriter' strategy involves holding spot assets while simultaneously selling call options at a higher price to secure additional profits. The analysis suggests that institutional system-managed funds consistently seeking option premium profits have suppressed overall market volatility expectations.

In fact, Bitcoin is currently trading around $77,000, and international oil prices are also moving below $100 per barrel despite geopolitical risk concerns. Concurrently, Strategy has purchased a total of 171,238 BTC this year. During the same period, newly mined Bitcoin amounted to only about 63,450 BTC. This means institutional demand significantly outpaces the rate of supply increase.

The media analyzed that Bitcoin's reduced volatility might not be a mere temporary phenomenon but rather a trend reflecting market maturity. As demand for Bitcoin spot ETFs, asset management firms, and corporate treasury strategies expands, liquidity is deepening, and investment participants are diversifying. There is also an assessment that the market structure is changing, making it difficult for extreme price volatility to repeat as in the past.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*