Cryptocurrency Volatility Expected Ahead of White House Crypto Summit
Implied Volatility Spikes Ahead of Summit, Options Markets Anticipate Volatile Weekend
If you plan to disconnect from trading screens this weekend, think twice. Analysis from digital assets trading firm STS Digital suggests that Friday’s White House crypto summit could lead to heightened activity.
Summit to Announce Strategic Bitcoin Reserve?
U.S. President Donald Trump, who promised a strategic crypto reserve in the lead-up to the November election, will host top players from the industry, including Coinbase, Chainlink, and Exodus. The latest rumor suggests that at the summit, Trump may announce the creation of a strategic bitcoin (BTC) reserve, shifting away from the Sunday disclosure that hinted at the basket of altcoins like XRP, Cardano’s ADA, and Solana (SOL) along with BTC and ether (ETH) as the core.
Options Markets Reflect Nervousness
The pricing of BTC, ETH, and SOL options on Deribit suggests that traders are bracing for a volatile weekend in the aftermath of the summit. "Options markets are showing the nerves (and illiquidity) going into the weekend and the raft of potentials," said Jeff Anderson, head of Asia at STS Digital, in a statement to CoinDesk.
Implied Volatility Expected to Soar
Options are derivative contracts that give the purchaser the right to buy or sell the underlying asset at a predetermined price at a later date. Implied volatility, a metric derived from the pricing of options, indicates how much traders expect the asset’s price to fluctuate over a specific period. Early Thursday, bitcoin options expiring Friday suggested an annualized implied volatility of 56%, while those expiring on Saturday traded at 80% volatility. The 24-point gap indicates expectations for increased price turbulence following Friday’s summit.
Figures Show Implied and Forward Volatilities and Breakevens
The table below shows implied and forward volatilities for BTC, ETH, and SOL, as well as straddle breakevens (expected price swings).
| Asset | Implied Volatility | Forward Volatility | Straddle Breakeven |
|---|---|---|---|
| BTC | 56% | 105% | 5.5% |
| ETH | 80% | 135% | 13.5% |
| SOL | 70% | 120% | 12.0% |
Forward Volatility Expected to Decay
Forward volatility is calculated by comparing the implied volatility of options with different maturities and indicates the expected volatility over the period between the two specified expiration dates, in this case, Friday and Saturday. The 105% BTC forward volatility translates to a 5.5% price movement expected between Friday 08:00 UTC and Saturday 08:00 UTC. (Deribit options expire at 08:00 UTC.)
Trader Expectations May Disappoint
Per Anderson, expectations for large volatility often end up in disappointment. "Quite often, large expected volatility like this is a disappointment in crypto as expectations > reality. That said, the breakevens do not feel large and options are by far the safest play for directional views in this environment," Anderson said, pointing to risks involved in taking directional bets in options expiring March 14.
Conclusion
As the White House crypto summit approaches, the cryptocurrency market is bracing for a volatile weekend. With implied volatility expected to soar, traders are preparing for a potentially wild ride. While the summit’s outcome is uncertain, one thing is clear: the cryptocurrency market is on high alert.
FAQs
- What is the significance of the White House crypto summit?
The White House crypto summit is a highly anticipated event that could potentially shape the future of the cryptocurrency market. - What are the expectations surrounding the summit’s outcome?
Expectations range from the announcement of a strategic bitcoin reserve to a basket of altcoins, including XRP, Cardano’s ADA, and Solana (SOL), alongside BTC and ETH. - Why are options markets reflecting nervousness ahead of the summit?
Options markets are reflecting nervousness due to the potential for significant price movements following the summit, with implied volatility expected to soar. - How do the figures show implied and forward volatilities and breakevens?
The figures show the expected volatility and price swings for BTC, ETH, and SOL, with forward volatility indicating the expected volatility over the period between the two specified expiration dates. - What are the risks involved in taking directional bets in options expiring March 14?
Taking directional bets in options expiring March 14 carries risks, including the potential for losses due to market volatility and other factors.
