Sentiment in the Bitcoin options market cooled significantly on Tuesday. As spot prices briefly dipped below $66,000, the BVIV index, which measures expected volatility over the next 30 days, surged, indicating traders were beginning to buy protection against further declines.
BVIV saw its biggest increase in nearly four months.
According to CoinDesk, citing TradingView data, BVIV rose nearly 20% on Tuesday, reaching 46.45%. This is the largest single-day increase for the metric since February 5.
BVIV reflects Bitcoin's 30-day implied volatility and is often considered a "fear gauge" in the crypto market. A rise in this index typically indicates increased demand for hedging against downside risk in the options market.
- BVIV rose to 46.45% on Tuesday.
- The daily increase was close to 20%.
- This marks the largest increase since February 5th.
After two months of calm, risk aversion has rebounded.
The report points out that Bitcoin market sentiment has been relatively stable over the past two months. Even though BTC fell from around $82,000 in early May and dropped to around $75,000 last week, BVIV remains roughly at 40% of its year-to-date low.
This meant that the previous decline was more of an orderly pullback than a concentrated panic sell-off. However, the situation changed on Tuesday. With Bitcoin spot prices falling by more than 6% in a single day, the market began to significantly increase its pricing in subsequent volatility.
The inverse relationship with the US stock VIX is strengthening.
The report likens BVIV to a Bitcoin version of VIX. Since the launch of the US Bitcoin spot ETF more than two years ago, institutional funds have continued to enter the market, and the inverse relationship between BVIV and Bitcoin spot prices has become more stable.
In other words, when prices fall, panic and hedging demand tend to rise simultaneously; when prices rebound, implied volatility tends to fall. This rapid rise in BVIV reflects a disruption of the previous weeks-long period of calm.
Additional information:When Bitcoin plummeted to nearly $60,000 on February 5th, BVIV surged by over 50% in a single day, even briefly exceeding 90%. This current surge is far from reaching those levels, but the shift in direction indicates a contraction in market risk appetite.
