With attention now turning towards the upcoming halving we had a little look at our historic dataset.
We have 2.5million+ minutely BTC Deribit volatility surfaces.
That one and only previous halving where we had a mature options market was 11th May 2020. This was also the year of the pandemic - in the UK we were in lockdown from March for several weeks.
In March of that year, vols had seen a massive spike from around 60% to well into the 200%s. BTC had dropped from around 8,000 to just under 5,000.
A lot of the narrative around the halving is along the lines of how much BTC rallied in 2020 - we question if that was necessarily driven by the halving.
If we zoom in, we can see what happened in the days leading up to, and immediately after the event:
BTC rallied in the run up but saw a sharp selloff late on the 8th May. BTC had peaked at 10,000 then was down around 8,500. Vols spiked from 70%s to around 110%.
Here was the exchange surface at 8:00am UTC on the 11th May 2020:
High vol / big fly / steep risk reversal
Then from midnight on the 11th, vols returned to their pre-stress levels, BTC rallied again and normal service was resumed.
Currently around 900 BTCs are mined per day, which in the grand scheme of things is small compared to the ETF bulldozer that is currently grinding through the market.
But options markets are a measure of market uncertainty - let's see if there are similar surface moves in the coming weeks.