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Volatility Analysis

Detailed breakdown of implied vs realized volatility to detect squeeze or breakout conditions.

What is Volatility? Volatility measures the intensity of price fluctuations, indicating the level of risk and opportunity in the market. High volatility suggests significant price swings (fear or euphoria), while low volatility often signals accumulation or indecision.

Key Concepts: When volatility compresses to extreme lows (the "Squeeze"), the market often coils like a spring, anticipating an explosive move. Conversely, after extreme spikes, volatility historically tends to revert to its mean.

Historical Realized & Implied Volatility

Realized Volatility

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Current Level
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Calculated live from Bitcoin price history (Source: CoinGecko)

Current Volatility Levels

Index Description Source Current Value Status
BVIV Bitcoin Implied Volatility (30d) Volmex Loading... Live Embed
DVOL Deribit Volatility Index Deribit Loading... Live API

Volatility Analysis Guide

1. Realized Volatility (RV)

Measures how volatile Bitcoin has actually been in the past (e.g., last 30 days). Ideally represents Historical Risk.

  • High RV: Nervous market, news-driven, liquidations.
  • Low RV: Consolidation, possible "calm before the storm".
  • Context: Bitcoin has distinct volatility cycles. Ultra-low RV often precedes explosive moves.

2. Implied Volatility (IV)

Derived from options prices, reflecting future expectations of volatility. Represents Market Sentiment.

  • High IV: Fear or Euphoria. Market expects strong moves (High cost of hedging).
  • Low IV: Market expects stability or is complacent.
  • Context: IV spikes before major events (Halving, ETF decisions, Fed rates).

3. The Power of Comparison (RV vs IV)

Case 1: IV >> RV

Market expects MORE volatility than currently realized.

Interpretation: Fear is priced in. Options are "expensive" (Overpricing of fear?).
Strategy: Selling volatility (if managing risk).
Case 2: RV >> IV

Market UNDERESTIMATES volatility. Strong moves are already happening.

Interpretation: Options are "cheap" relative to the price action.
Strategy: Buying options / Trend continuation.
Case 3: IV ≈ RV

Market is Fairly Priced.

Interpretation: No strong regime bias. "Neutral" state.
Strategy: Standard directional trading.

4. Volatility Risk Premium (VRP)

VRP = Implied Volatility - Realized Volatility
  • Positive VRP: Market pays a premium for protection (Normal in crypto due to tail risks).
  • Negative VRP: Market is complacent or underestimating current risk.

5. Practical Applications

  • Trading: Use volatility compression (Squeeze) to time breakouts vs range-bound strategies.
  • Risk Mgmt: Reduce position size when RV is extremely high (unpredictable chopping).
  • Sentiment: Use IV as a "Fear Gauge" to identify oversold bottoms (Max Fear) or overheated tops.