“Low volatility is not calm seas; it's a storm brewing! The BTC fear index has fallen below 40%, and the market is lying flat? Be careful not to fall into a pit!”
Plain language interpretation:
What does it mean for the 'fear index' (IV) to fall below 40%?
Simply put, it means the market participants believe that in the coming period, the price of Bitcoinwon't bounce back. Everyone expects it to be like lukewarm water, with no excitement in terms of rising or falling. For BTC, 40% is already the 'flat line'.Why is this happening?
Period of big event vacuum: Recently, there hasn't been any news that could shake the market (like sudden interest rate hikes from the Federal Reserve or the SEC approving ETFs), and everyone is directionless.
The 'summer fatigue' has arrived: A longstanding tradition in the crypto circle, traders want to go to the beach in summer, leading to reduced trading volume and a lifeless market.
Both bulls and bears are timid: Those bullish are hesitant to charge forward, and those bearish are reluctant to hit hard, resulting in both sides staring at each other, simply moving sideways.
Master's view:
After the low volatility sideways movement in August last year, a big bearish candle smashed through! Why? The market was too 'comfortable'! At that time, option sellers thought it was 'stable' and were madly selling 'insurance' (options) for small profits. When a black swan event occurred, IV shot up to over 70%, and those sellers suffered massive losses! Will history repeat itself this time? I think the probability is quite high! This 'low volatility breeding ground' is exactly the right time for big institutions to quietly accumulate or lay 'option landmines'. Retail investors find it boring? That's precisely the window for smart money to position!
What does this mean for retail investors?
Spot traders: Get ready to 'count mosquito legs'! Don't expect to get rich quickly in the short term; it’s likely to continue narrow fluctuations. Placing orders within a range is more reliable than chasing highs and cutting losses.
For contract gamblers: High leverage can easily lead to 'face slapping'! With low volatility, even a small spike can blow your position. Recommendation: either reduce leverage or take a break!
Options veterans:
Buyers (those buying insurance): Now it's cheaper to 'buy lottery tickets'! With low implied volatility (IV), the cost of buying Calls (bullish) or Puts (bearish) is low, suitable for positioning for potential 'big moves' in the future (like betting on a major event in September).
Sellers (those selling insurance): The 'premiums' collected have decreased, but the risks haven't lessened! Selling options now is like catching flying knives—looks safe, but it's deadly! A sudden market event could lead to significant losses. My personal opinion: selling low volatility options is dangerous; tread carefully!
“The market will not remain asleep forever! Low volatility is a spring; the more you compress it, the more violently it will bounce back! Friends, what do you think the next explosive point will be?
Is it the 'hawk-dove battle' of the Federal Reserve in September? Or the 'ultimate judgment' of BlackRock's ETF? Or... (Share your predictions in the comments!)
Follow the master; when the storm comes, I’ll remind you to collect your clothes! Remember to stock up on ammunition; after low volatility, a big market move often follows!”
