Analyst: Bitcoin Halving Is Not Volatility Event Despite Rising Implied Volatility

Bitcoin's massive reward halving is unlikely to produce a volatility eruption, says Amberdata's Greg Magadini. Over time, the Bitcoin blockchain's reward halving has had a predictable effect on miners and the BTC price.

Blockchain code will lower per-block bitcoin {{BTC}} issuance to 3.125 BTC from 6.25 BTC on April 20th, marking the fourth mining-reward halving. Increasing implied volatility (IV) on the largest cryptocurrency by market value suggests price turmoil in the days leading up to the quadrennial event. Still, one observer opposes volatility bullish wagers.

"From a qualitative perspective, I continue to believe paying a volatility premium for a highly predictable outcome (the BTC halving) isn't worth a volatility event premium," Amberdata derivatives director Greg Magadini said in a newsletter on Monday.  

Before binary events with uncertain market outcomes, traders bet bullishly on volatility. Uncertainty leads to pre- and post-event price turbulence, so traders buy call and put options or volatility futures to profit.  

The effects of Bitcoin's reward halving on its native currencies and miners are widely known. The cryptocurrency has usually rallied strongly in the 12-18 months after halving. Major crypto events including Ethereum's Dencun upgrade, Shanghai upgrade, and spot BTC listings had little market impact, surprising speculators expecting a price volatility spike.  

Not to mention that nearly all the big volatility events in crypto (ETH PoS merge, ETH Shanghai upgrade, BTC spot ETF decision) had disappointed IV [implied volatility], buyers when RV [realized volatility] failed to materialize by very large margins," Magadini said.  

Amberdata says Bitcoin's 30-day implied volatility, which measures price turbulence over four weeks, has jumped to 75% from 68% in a week. For the first time since early March, the 30-day volatility risk premium (VRP) has above 10%. The VRP rises before and after major market events and falls during calm periods. "Options implied volatility is overpricing the event," Magadini said of VRP's rise.  

Bitcoin was at $71,800 at press time, up 3.5%. Since hitting lows of $64,500 on April 2, CoinDesk data show the cryptocurrency has risen over 11%. The CoinDesk 20 Index, a crypto market index, rose 3.8% in 24 hours.  

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