Arcane Research analysts predict a possible surge in volatility on the crypto market

According to experts, this is indicated by the peak values of the correlation of open interest in BTC and ETH to the capitalization of these assets

12.10.2022 - 13:40

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What’s new? Experts at analytics firm Arcane Research have noted that the correlation of Open Interest (OI) in futures and perpetual contracts on bitcoin and Ethereum to their capitalization reached a new high. According to experts, amid the current consolidation, this could be a sign of a sharp increase in volatility in the near future. According to the company, the OI to capitalization in bitcoin reached 3,21% and in Ethereum - 4,24%.

Source: Arcane Research

What else did analysts report? Experts emphasized that this ratio has held near peaks despite the upgrade on the Ethereum network. Most market players hedged or opened directional positions on the eve of the event. Analysts recommended using the straddle strategy to mitigate potential deleveraging.

The Straddle option strategy is a combined trading technique whereby a PUT option (a bet on a falling rate) and a CALL option (a bet on a rising rate) are purchased simultaneously.

In early October, analytics firm Glassnode reported that bitcoin has been showing consolidation in the range of $18,000 to $20,000 for four months. According to experts, this may indicate the likelihood of volatility returning to the crypto market.

Analysts at Bloomberg also pointed out that BTC has been trading in the range of $20 000 for the past four months. That said, the indicator, known as the Bollinger bandwidth, narrowed to the values of 2020. Some experts see this as a sign of the imminent intensifying fluctuations of the asset and a possible drop in its price.

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