Volatility Risk Premium Indicates Potential Stability for Bitcoin Post-Halving

Volatility Risk Premium Shows Potential Stability After Bitcoin Halving

A new indicator called the volatility risk premium (VRP) marks a period of low volatility in the market. VRP measures the difference between an asset’s implied volatility, which is the market’s expectation of price turbulence, and its actual volatility over time. It represents the additional premium demanded by option sellers to compensate for risks arising from uncertainty and price volatility.

Data from Bitfinex analysts shows that one-month VRP has fallen from 15% to 2.5% since the Bitcoin (BTC) blockchain’s mining reward was halved on April 20. The calculation is Volmex’s index of Bitcoin’s 30-day implied volatility (BVIV) and one-month realized volatility (VBRV).

According to analysts at Bitfinex, the significant contraction in VRP indicates that market expectations are shifting towards a more stable and predictable environment after the halving. This suggests that future volatility may be lower than previously estimated.

Reduced uncertainty leads market participants to anticipate more predictable conditions. There have been sharp declines in BTC’s one-month VRP, indicating a more stable market following the halving. This development is seen as positive news for long-term investors. Bitcoin is currently trading around $62,588, relatively unchanged since the halving, after recovering from recent lows around $56,500.