Bitcoin’s annualized 30-day implied volatility index, BVIV, the so-called fear gauge, continues to hover below 40%, well below highs above 60% seen during the early June and early February price sell-offs.
The index is influenced by demand for options, or hedging instruments.
So, the low reading indicates limited demand for protective options and suggests traders see little reason to brace for sharp price swings in the near term.
This stability contradicts the uncertainty surrounding Wednesday’s Fed rate decision. While most observers expect the bank to keep rates unchanged, some, including hedge fund giant Citadel, expect a hike in borrowing costs.
The CME’s FedWatch tool now assigns roughly a 35% probability to a rate hike at the upcoming FOMC meeting, an unusually high level of uncertainty for this late in the decision cycle. Fed moves are normally almost fully priced for a single outcome – hold, hike, or cut – by this stage.
Bitcoin traded above $64,000 on Wednesday, up 1% on the day, with the broader market green ahead of the Federal Reserve’s rate decision at 2 p.m. ET, per CoinDesk data. Ether added 1.7% to $1,909 and XRP led the majors at 2.6%.
The base case is a hold. About 70% of traders expect the Fed to keep its rate at 3.50% to 3.75%, a sixth straight meeting on pause, per CME data.
But roughly 30% now price a quarter-point hike, and the case has serious backers: Citadel Securities told clients it expects a surprise increase this week to shore up Warsh’s inflation-fighting credibility, and UBS said such a move would not surprise it.
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