Volatility and FearSep 20, 2021
The Deribit Volatility (DVOL) index measures the 30D implied volatility using Deribit’s orderbook. Effectively, this index tries to estimate how volatile the options market expects BTC to be over the next 30 days. The figure is annualized, so you can divide by the 19.104 (square root of 365) to find the daily expected volatility. (You can read more about it here).
Ever since BTC dipped a few weeks ago, volatility expectations for it have also slowly grinded lower. However, a less aggressive move down over the last few days has caused a spike in volatility expectations. The market seems more fearful now than it was during the flash crash (which was worse). This highlights the weight of tomorrow’s FOMC meeting on global markets. Hopefully, we shed some of the uncertainty as we progress later into the week, getting better clarity on true sentiment.