Market Watch: After the Third Great Volatility

High volatility comes with higher uncertainty. How will the market move in the coming days?

Stimulated by the release of a lot of good and bad information around May, market volatility rose again from around 50 to a high level above 80, ushering in the third volatility peak so far this year; then as Bitcoin passed the difficult time on April 30, volatility declined and the market rose once again under the impetus of good news. After breaking the $3,000 mark, ethereum surged to a high of $3,600 yesterday, and the subsequent pullback did not affect its market cap to hit the $400 billion mark. The rising speculative sentiment has driven a large number of non-mainstream passwords to “soar” in price, with DOGE as the representative of speculative sentiment-related passwords rising in market value, and DOGE even leaping to become the fourth largest passwords in digital asset market value, surpassing XRP and other old non-Ethernet public chains and various high-quality projects.

High volatility comes with higher uncertainty. A new indicator found by TokenInsight may help.

币世界-市场观察:第三次大波动之后

Historical volatility of bitcoin spot price vs. perpetual contract index price over the last 30 days, source: gvol.io

Bitcoin’s Market Cap Share Continues to Decline as Ether Comes Out on its Own

The monthly options delivery and position move on April 30 created short-term selling pressure on bitcoin’s price, but did not have a significant impact on the price. After the options delivery was completed at 4:00 p.m., Bitcoin’s upside pressure decreased and rallied from around $53,000 to around $58,500. The price of bitcoin was driven upward by a plethora of positive market news: traditional market giants such as Goldman Sachs began offering their clients perpetual contract products for investing in digital assets, despite successive regulatory outbursts, and the “exasperation” of traditional market giants such as Munger over the development of digital assets such as bitcoin has instead boosted investor confidence in bitcoin. The confidence in bitcoin has been boosted by the “exasperation” of traditional market giants such as Munger over the development of digital assets such as bitcoin.

Market Watch: After the Third Great Volatility

Bitcoin price movement over the last 30 days, as of May 7, 14:00, source: tokeninsight.com

At the same time, plenty of bearish news has been breaking. The U.S. Treasury Secretary, SEC Chairman, and others have expressed concerns about bitcoin, and banks like CITIC have announced outright bans on bitcoin trading. The steep increase in regulatory pressure exacerbated market volatility: on May 4, total bitcoin spot volume rose above $10 billion on the 16 exchanges tracked by TokenInsight, with the highest volume of the week reaching $12.86 billion and the highest volume of perpetual contracts reaching $87.1 billion. A large number of derivatives blowouts also occurred at this time.

Market Watch: After the Third Great Volatility
Market Watch: After the Third Great Volatility

Last 7 days bitcoin spot and perpetual contract movements as of May 7, 15:30, source: tokeninsight.com

Market Watch: After the Third Great Volatility

Deribit Clearing futures trades on the exchange, source: gvol.io

In contrast to bitcoin, ethereum seems to have ignored the impact of the bearish news. Since Monday, trading in Ether options on the Deribit exchange has been active, and its premium volume has continued to outpace that of Bitcoin, still the first time in the history of digital assets; and the way the price of Ether has gone up has undoubtedly raised professional investors’ expectations for Ether’s performance: according to the trading records on May 6, the number of options on July 30, September 24, December 31 According to the trading records of May 6, investors traded and allocated a concentration of bitcoin options with $5,000 strike price in the medium and forward options that expired on July 30, September 24 and December 31.

Market Watch: After the Third Great Volatility

Ether price movement for the last 30 days, as of May 7, 16:30, source: tokeninsight.com

Market Watch: After the Third Great Volatility

Ether options trading on the Deribit exchange on May 6, source: gvol.io

Market Watch: After the Third Great Volatility
Market Watch: After the Third Great Volatility

Recent seven-day volume of ethereum options (left) vs. bitcoin options (right) (in terms of premium; axes have been aligned), source: gvol.io

The movement in weekly volume is another important signal: Bitcoin spot volume has been lower than Ether spot volume this week. Ether’s weekly volume reached $84.19 billion, compared to Bitcoin’s $71.84 billion for the week; Ether’s main volume was concentrated after May 3. Investors appear to be changing their orientation towards mainstream digital assets, both individually and institutionally.

Market Watch: After the Third Great Volatility

Recent volume movements in mainstream digital assets, source: tokeninsight.com

Speculative Sentiment: DOGE and Volatility Spreads

Signs in the market already suggest that speculative sentiment may have reached a new level.

The value of DOGE, a key indicator of speculative sentiment, has reached “beyond belief”: $75.51 billion market cap. From “worthless” to almost on par with a host of Commonwealth currencies such as the New Zealand dollar, Australian dollar and Canadian dollar, DOGE has gone from being “worthless” in less than half a year. Now, it is the fourth largest digital asset, with daily trading volume peaking at $28.73 billion, making investors around the world jaw-dropping, and some companies have even announced their support for DOGE payments, including some of the biggest names such as the NBA Mavericks.

Market Watch: After the Third Great Volatility
Market Watch: After the Third Great Volatility

DOGE price and volume movements over the last 90 days, source: tokeninsight.com

Has the market gone into overheating? It doesn’t seem so for now. Based on Q1 trading data, TokenInsight has found a metric that seems to be a simple measure of whether the market is overheating: the Volatility of Difference (VFD).

Volatility difference is the difference between the historical volatility of mainstream digital assets and the implied volatility of their options. Considering that historical volatility indicates the actual market performance, while implied volatility represents the subjective expectations of professional and institutional investors, it is often considered as “rational expectations”. Therefore, when the difference between the two is greater than 0, it indicates that the market is overheating and prices tend to be on a downward trend to correct the overheating, while when the difference is less than 0, it indicates that prices are below rational expectations and are likely to rise to meet rational expectations.

The volatility spread is usually inversely correlated with the movement of mainstream digital asset prices: an increase in the volatility spread tends to indicate that the market is overheating or heading towards an overheating phase, with asset prices falling, while a decrease in the volatility spread indicates that the market is starting to become undervalued, with room for asset prices to rise.

Market Watch: After the Third Great Volatility

Near 30 day bitcoin options historical volatility vs implied volatility, source: gvol.io

From a near-month volatility spread perspective, both Bitcoin and Ether are currently in a volatility negative cycle after a positive volatility spread cycle, and the volatility spread is still in a decreasing trend from the trend of historical volatility and implied volatility. This means that asset values are undervalued and asset prices have some momentum to correct upward, so the upward trend of mainstream digital assets may continue in the next 2-3 days, but it is difficult to judge the market trend for the longer term. Considering the linkage between mainstream digital assets and other digital assets, the market may not have entered the overheating phase yet, and investors can still enjoy a short “happy hour” in the near future after the third wave.

Market Watch: After the Third Great Volatility

Recent 30-day Ether options historical volatility vs implied volatility, source: gvol.io

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/market-watch-after-the-third-great-volatility/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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