Bitcoin has come to a calm period – What does this mean for the crypto market?

In this post:

  • Bitcoin’s volatility risk premium (VRP) has collapsed since halving. This indicates that traders foresee relatively stable market conditions ahead.
  • Bitcoin’s daily close, at around $62K, leaves BTC/USD increasingly at risk of losing more of its recent gains.
  • The halving has come and gone. There is no impact in sight. What should you do moving forward?

Last week, Arthur Hayes, the former CEO of the BitMEX crypto exchange, expressed his belief that bitcoin (BTC) had reached its lowest point. However, he also mentioned that the anticipated upward movement is expected to be gradual.

Now, an indicator known as the volatility risk premium (VRP) is indicating the same, signaling a market environment with relatively low volatility ahead. This could be viewed as a positive development by long-term investors.

Bitcoin market performance after halving

Currently, the value of BTC stands at $62,552.88. This represents a slight 0.5% increase compared to an hour ago, but a 1.4% decline since yesterday. The current value of BTC is 9.7% higher than its value a week ago.

The current global crypto market cap stands at $2.42 Trillion, with a decrease of -2.28% in the past 24 hours and a significant increase of 103.59% compared to one year ago. Currently, BTC’s market cap stands at $1.23 Trillion, indicating a BTC dominance of 50.99%. Meanwhile, Stablecoins’ market cap stands at $161 billion, representing a 6.65% share of the overall crypto market cap.

With that in mind, VRP captures the phenomenon where the expected price turbulence, as indicated by an asset’s option-induced implied volatility, tends to be higher than the actual realized volatility in the long run. The spread reflects the extra compensation that options sellers require due to the increased risks linked to uncertain future conditions and price fluctuations.

According to data tracked by analysts at Bitfinex, the one-month VRP has significantly decreased from 15% to 2.5% since the implementation of mining reward halving on April 20 by the BTC blockchain. The calculation of VRP relies on the difference between Volmex’s BVIV and VBRV, which measures the implied and realized volatility of bitcoin over a 30-day period.

Michaël van de Poppe, the founder and CEO of trading firm MNTrading, voiced his frustration regarding the absence of a clear direction in the market following Bitcoin’s block subsidy halving in mid-April.

“Bitcoin is gradually moving towards the lower boundaries of the range to test the support,” he wrote on that day. The recent turbulence in the crypto exchange-traded fund (ETF) sector has left observers with varying perspectives on the future.

Post BTC halving crypto life

The Bitcoin halving on April 19 was highly anticipated by crypto investors. Historically, Bitcoin halvings have resulted in remarkable surges in the crypto market. Despite the recent decline in Bitcoin’s price, many anticipate that this halving cycle will follow the same pattern.

In an event that takes every four years, the Bitcoin blockchain recently reduced the per block supply emission from 6.125 BTC to 3.125 BTC. This has effectively halved the rate at which the supply of Bitcoin is expanding.

Experts believe that global debt worries 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.

The volatility risk premium (VRP) for both Bitcoin and Ethereum have now seen dramatic reductions. Bitcoin’s VRP collapsed to 2.5 percent from 15 percent, and Ethereum’s to 8.5 percent from 18 percent post the halving. Volatility risk premium (VRP) reflects the tendency for implied volatility to surpass realised volatility. This discrepancy between what is anticipated in terms of volatility (implied) and what actually transpires (realised) constitutes the risk premium. Essentially, VRP quantifies the premium that investors demand as compensation for the additional risks associated with the uncertain future volatility of asset returns.

As reported by Bitfinex

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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