Bitcoin Traders Prepare for ‘Fat Tail Effect’, Focus on Trump Bitcoin Conference Speech
Options market activity on Deribit showed a significant increase in the "butterfly index", indicating that the market is anticipating more extreme moves.
"This week, we'll hear Trump speak at the Nashville Bitcoin Conference. As long as Trump remains at the top of the race, that's what's going to happen this week," the derivatives executive said in an email. 'potential catalysts for major events'. Derivatives markets appear to agree, and the pricing we're seeing supports that assertion."
“We don’t talk about it often, but what’s worth noting this week is the surge in the 25-delta wing relative to ATM volatility. This type of activity in the options market reflects expectations for the Kurtosis, or fat tails, of the higher return distribution.
The fat tail effect refers to the increased probability of extreme market conditions, which may result in major market shocks due to the occurrence of some unusual events.
