Deribit's Bitcoin Volatility Index Indicates Continued Rally, Reaches Highest Level in 16 Months

Deribit’s bitcoin volatility index, DVOL, has experienced a significant surge, becoming an important measure of market participants’ anticipation regarding price movements in the next 30 days.

Within a month, the 30-day implied volatility index has risen from an annualized 41% to 76%, reaching its highest point since November 2022, as reported by TradingView.

Impact on Options Market and Call Overwriting Strategies

The rise in implied volatility positively influences option prices, especially for derivative contracts offering the right to buy or sell the underlying asset.

This development enhances the appeal of “call overwriting” strategies, allowing investors to generate additional income beyond their spot market holdings.

With greater volatility, investors often adopt call overwriting strategies by selling call options at levels above the market rate. The premium received for selling these calls represents an additional yield on top of their spot market investments.

Notional Open Interest Reaches Record High

Deribit, comprising 85% of the global crypto options market, has experienced increased activity. Bitcoin’s 58% surge this year, approaching record highs near $69,000, has contributed to the overall increase in notional open interest.

Data from Laevitas reveals a record notional open interest of $32 billion in the crypto futures and options segments, with the options segment contributing nearly $30 billion.

deribit open interest — *Deribit Open Interest (Source: Laevitas)*

High Demand for Calls at $200,000 Strikes

The recent surge in DVOL has led to increased interest in calls, with trading activity observed at strikes as high as $200,000. Some experts foresee Bitcoin’s bullish trend peaking around $200,000 by September 2024.

ETF-Triggered Hype Fuels Bitcoin Optimism

Deribit’s Chief Commercial Officer, Luuk Strijers, notes that the ETF-triggered hype surrounding Bitcoin is no longer limited to surpassing $100,000 but extends to the $200,000 mark.

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