Can BTC derivatives sincerely aid in hedging Bitcoin volatility?

Although the bulls of BTCUSD have attempted to bounce back in the recent weeks from the lows of $6,100 levels, the trend is restrained well below 21-EMAs, technically, we see no bullish momentum to back-up buying sentiments. As a result, the trend goes in a narrow range for now.

On the flip side, the major price trend of bitcoin has been oscillating between $5700 - $11700 levels, while the bulls are holding stronger supports at range base as both leading oscillators (RSI & stochastic curves) and MACD indecisive. 

Most importantly, decreased realized volatility (RVs) is coupled with this stronger support.

Having said that, one should not forget the vigorous bullish trend last year, the journey from $735.3 to a whopping $19,891. (at BITFINEX exchange), or almost 2,605% surge was commendable. The prices have held steady from the last couple of months’ despite bears attempts of nudging below $6k levels.

Well, it is now stuck in the range between $6,100 and $6,850 levels over the past few weeks, we’ve got mixed bag of analysts who have been differed on the influence of the presiding of the US SEC (Securities and Exchange Commission) of Bitcoin ETFs applications.

On a broader perspective, as universally tradable hedging and speculative derivative vehicles are introduced by regulated financial institutions and the liquidity of Bitcoin considerably improved at CME and CBOE, it has been arduous for the price manipulation of Bitcoin.

Nevertheless, as time progressed the high volatility owing to the underlying news and the prosperity in the emerging crypto-industry, widely tradable trading and investment vehicles render abundant leverage to large investors that are capable of reversing market trends.

Since its inception, Bitcoin has demonstrated the highly volatile scenarios. However, during the past few days, Bitcoin’s price volatility has plunged to the lowest level since June 2018 (refer above technical chart). The U.S. Securities and Exchange Commission (SEC) will most likely perceive Bitcoin’s soother price oscillations conductively.

Hence, bitcoin’s low volatility would imply that the price manipulation is waning.

With a view of arresting any bullish risks, long positions in CME BTC future contracts for December deliveries are advocated.

Alternatively, one can bid ATM call options, while evaluating the future prices for this unconventional currency BTCUSD. Pricing BTC vanilla options at cryptocurrency options dealers, such as, ORE which is not straight forwards as it’s a newly invented and volatile instrument. However, they seem to be exploiting with advanced mathematical models and techniques to try and infer future behavior of BTC.

Capitalizing on such Bitcoin vanilla options, BTC option traders can get a clarity about bitcoin future prices and volatility to certain extent.

Currency Strength Index: FxWirePro's hourly BTC spot index is inching towards 165 levels (which is bullish), while hourly USD spot index was at 31 (mildly bullish) while articulating (at 10:43 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex