Watch For Lightning

The clouds began to darken while the cool breeze came rolling through.

I knew it was only a matter of time before the skies opened up, cleansing the hot ground below with buckets of rain.

This was mother nature’s signal that it was time for me to take cover under my porch and watch the rain play out.

There are few things I enjoy more than a summer storm.

Especially the kind that creeps in unexpectedly late in the afternoon after a hot long day in the sun…

It’s a refreshing change that reminds me to slow down and calm my otherwise hectic overheated mind.

I’ve done it ever since I was a kid, and my favorite part has always been catching the huge crashes of lightning that often accompany the storm.

One moment the environment is calm and docile, the next a giant flash comes bolting out of the sky leaving an earth shaking echo of thunder in its wake.

It’s startling if you’re not prepared for it.

Sometimes it’s violent enough to wake you up from a deep sleep.

But if you’re actively watching the storm play out, it’s not surprising at all. There’s always a few moments of delay between when the lightning strikes and the thunder roars.

I bring this up now because it reminds me a lot of what’s been going on with crypto volatility (or lack thereof) in recent weeks.

We’re in the calm phase of the storm, with prices slowly chopping down. And we only have raindrops, no flashes of lightning before a thunderous boom.

This lack of volatility and the boredom is lulling most people to sleep.

Meanwhile those of us who are actively monitoring the storm each day know that before too long, the roaring thunder of increased volatility will arrive again and startle the market back to life.

And with the large Q2 expiry close we discussed last week only a week away now, let’s dive into some options data and see what to be on the look-out for as we attempt to catch lightning (volatility).

Summer Doldrums
What was boring has only gotten boring-er.

There’s perhaps no data point that sums up how docile Bitcoin has become better than this B-VOL chart, which is a measure of its realized volatility levels dating all the way back to 2016.

As we can see below, prior to the summer of 2022 Bitcoin was historically realizing volatility levels in the range of 30-180. Then it suddenly fell off a cliff following the collapse of Celsius and BlockFi two years ago and never returned to form.

It’s been anemic ever since.