Bitcoin Implied Volatility Hits Near Two-Year Low, But Funding Rate Indicates Market Remains Bullish

On July 3rd, as per Deribit's Bitcoin Volatility Index data, the Bitcoin implied volatility has declined to its lowest point in nearly two years. This index gauges the 30-day forward-looking annualized price volatility expectation and suggests a notable transformation in the trading behavior of the largest cryptocurrency. During the past two months, Bitcoin has been oscillating within a narrow range between $93,000 and $111,000, which is in stark contrast to its historical price trends. Market analysts attribute the reduction in volatility to multiple factors, with a crucial one being that Bitcoin holders have been increasing their activities of selling bullish options. David Lawant, the Head of Research at FalconX, pointed out that this strategy of generating income by selling bullish options has successfully dampened price volatility. Currently, approximately 80% of Bitcoin options open interest is concentrated within the $100,000 to $120,000 strike price range, forming a natural price cushion zone. It is worth noting that despite the low volatility, the Bitcoin perpetual contract funding rate remains positive, indicating that the market sentiment remains bullish.