How a Quiet Bitcoin Signal Is Now Showing a Shift in the Market

Transcript

In general, I think that, you know, Bitcoin is bonafideed and, you know, clearly under the CFTC's remmit based on previous administrations and in the sort of, you know, regulatory seats and and sort of things that they've said. And so, Bitcoin is is very clearly a commodity. I think ETH, you know, is also is also very similar in in that regard. But a lot of the things that are built on top of Ethereum and Salana stand to benefit and maybe things like Hyperliquid and and Lighter and others stand to benefit from the Clarity Act and the increased clarity in in the ecosystem. I think that you know it's it's nebulous, you know, how certain things are are regulated, you know, what is um you know, security, what is a broker, and the Clarity Act brings uh

transparency and clarity to those those areas. And so I do think that Ethereum and and Salana ecosystems Hyperlid have a lot to gain from this act uh the statute going through and it's very interesting to see how the market will react to that. I mean you've seen in recent days that on a 7-day time frame Ethereum is up almost a percent and Bitcoin is is roughly up half a percent. Hi everyone, welcome to another episode of Bits and Bips the interview. My name is Steve Erlick. I'm the head of research at Sharplink and as always your host. Got a lot to talk about today.

Clarity is hitting the final stages. We got to see if it's going to get over the the finish line and there's a lot of volatility in the markets as traders try to hedge slash take advantage of what may or may not happen. We're going to get into all of it, but before we do, uh, as always, just a little bit of housekeeping. Nothing that you see or hear on this program is financial or investment advice. Uh, for full disclosures, please see unchainedcrypto.com/bitsands andbips. Uh also second want to let you know that Bits and Bips now has its own channels separate from from Unchained.

So if you are not subscribed on these channels, uh you're going to stop seeing these episodes. Um don't miss out on hearing the sharpest takes in crypto on how um our two industries are colliding. So u make sure that you subscribe and follow us on YouTube and all YouTube access all regular platforms um from where you can get our podcasts. And finally, before we dive in, let's hear from one of our sponsors. >> This episode is brought to you by Cape, America's privacy first mobile carrier. Same premium service you'd expect from any other carrier, but designed so your number, your location, and your data actually stay yours. Get 33% off 6 months at cape.co/chained.

Heads up everyone. We've now fully transitioned Bits and Bips to its new dedicated channels. So, if you're not yet subscribed to the new Bits and Bips channels on X, YouTube, Spotify, Apple Podcast, or wherever you get your podcast, go there and subscribe now. For the next few weeks, we'll play segments of the full interviews on Unchained as a reminder. But for now, you'll only hear those short segments of bits and bips on Unchained. No more full episodes. You can get links to all of the dedicated channels with the full episodes at unchanged crypto.com/bits and bips spelled bits. Thanks again.

All right, welcome back. So, um, very pleased to bring in my guest for today, Cole Canelli. Cole is the CEO and founder of Volmeix Labs, uh, an analytics firm that provides, um, some of the key indicators of sort of how traders are pricing market volatility. So welcome Cole. >> Hey, Steve. Great to be here. Thanks for having me. >> Yeah, absolutely. And and this is a great week to have you because of all the volatility that I I mentioned before in my my initial remarks. But before we get into sort of what you're seeing on your platform, I'd like for you to just briefly give like the one or two minute overview of of your company and in particular the the products that you provide.

>> Yeah. Um so we we built Volmex uh Volmex Labs. We have created the BV index, the Viv US index and the EV index which are three flagship indices really. We're a benchmark index company. We provide financial benchmark indices. We license them to the likes of uh Poly Market, Bitfinex, Trading View, Bloomberg Terminal, and others soon. And essentially, our flagship product is a volatility index that measures the 30-day implied volatility of the Bitcoin market or the IBIT market in the case of Biv US. Um, EV is is the most, you know, longest running, ubiquitous, uh, widely adopted standard for this type of product. We have many other families of indices that

are live today and coming soon. And essentially we've built the Bitcoin volatility index standard for the digital assets crypto market. >> So I think to kind of summarize what you said uh people look at your indices and then they understand they try to understand like how traders are uh what level of volatility they're expecting uh over certain durations. I know that you have different different timelines. It's not necessarily an indicator of which direction the market's going to go but it does uh but it does give you a sense of how wide or how yeah I guess how widely they expect the market to move over a certain period of time. Is that correct? Essentially, BVIV is a measure of implied volatility for Bitcoin, meaning the forward-looking moves, the

forward-looking risk in the digital assets, Bitcoin market. And so, largely it's associated with, you know, negative shocks to the market. When the market is fearful, DV tends to always spike. It's very persistently negatively correlated in times of fear, but can also go up in in times of greed. And so it's a very versatile product which you know provides this robust and missionritical measure of the market's expectation for volatility. >> Yeah, it's it's kind of funny. I mean I used to um back when I was at Forbes I think I did a story on derabits implied volatility products and uh and was kind of looking for some of those correlations between like traditional market moves like not only in crypto but then also um as it relates to like the

S&P etc. I mean, I'm sure you're familiar with the term short the VIX, and anyone in Tradfi listening here knows what that means. And I was curious to see what types of correlations there were there. And um at the time, this was a few years ago, I didn't actually see a lot of it, but but I guess today uh things are much more mature. I mean, this may have even been before ETFs had uh been approved. Um things are a lot more correlated. So, I'm interested to kind of see that. And uh and it's all based on like the like the price of the options to kind of hedge that that's where like the implied aspect of the of the name comes from. So let's let's dive into what you're actually seeing in the market because a lot of people are wondering like how do I

try to I guess position for the upside if clarity does pass but protect my my downside. And there's a lot happening as we roll into these next couple of crucial weeks. uh Bitcoin, ETH, Soul. I mean, they have all bounced off of recent lows and have had a couple of good good weeks. But again, now we're running into uh a lot of different factors. I mean, there's clarity. There's um price of oil going back again above $100 a barrel. Um the ECB decided to keep rates the same today, but the FOMC is meeting next week and uh while the Fed's being tight lipped, it's hard to anticipate what um what the Fed's going to do and and futures traders are are pricing in I think one or even two

rate hikes this year. So what are you seeing across your platform? >> Yeah, it's really interesting time in the market. you know, zooming out, there's definitely a a very strong institutional demand for blockchain tokenization as infrastructure. I think you know, the Bitcoin price is a little bit uh you know, subdued at the moment, but that surely will will come back uh in my opinion. Um essentially, you know, we have built the BV index, which our canonical sort of you know, flagship index is a 30-day tenor. Um we have the only Bitcoin volatility index term structure in the market and so you can look at the expectation for the market over the coming one day, 7day, 14 day,

60, 90, 180 and you know different um you know uh you know sort of you know um you know things happening in the market can be uh visible in this in this term structure. We show it on our website charts.vmex financebiv or search for viv on the volmex website. Essentially, we've noticed um a slightly elevated um you know uh volatility index uh for the 14-day uh in in the term structure and you know this could be due to the clarity act you know being either imminent or different developments coming um there was also some uh call buying activity last week in the options market uh for a two to four week you know sort of out um you know calls and

so there seems to be some you know ramping expectations for the Clarity Act um in the coming weeks. I mean, obviously, we both hope that that happens. That would be tremendous um you know, tremendously positive advancement for the industry. Um but yeah, there's there's a slight elevation in the BV 14-day index or between the seven and 14 day and um you know, we're we're looking forward to the clarity act hopefully coming to market. Um I know there's been a lot of folks on the hill putting in a lot of work uh related to this and that will create a lot of you know clarity and and uh you know uh you know reduce the nebulous nature of of some of the things that are you know maybe holding back uh tokens and uh you know the industry broadly.

>> Yeah. Maybe um if we could let's dive a little bit more into the indices that uh you mentioned and and uh even if you need a moment to just kind of pull them up on your your screen. I'd love to kind of um kind of get a sense of where they're at and like like where the current levels of volatility um fit within like the like the the historical timeline. Um, is this a period of time where we're seeing a lot of expected V or uh I would imagine it's not going to rise up to like pure fear and panic when like FTX collapsed or or something like that, but like like how like what's the historical context for where like maybe your your Bitcoin and and where your ETH um and where your ETH indices are

sitting? >> Yeah. So um essentially the BV index is currently at 41. Um it's actually come up uh and sort of seen a rise in in the index value in terms of points and percentage gain in the last couple of of weeks. Um and so on a relative basis we show this metric called BV rank. Biv percentile. Biv rank is basically the you know where it's at in terms of 52- week high and low. So generally it's actually at a quite a low point but it was actually at close to the 9month or 12-month low of uh you know sub 40 and in the last couple of days Bitcoin has seen a rise and then there's been some

positive um you know correlation between the BV index and the Bitcoin price rising as mentioned typically you see a very negative uh you know persistent correlation where markets fearful on February 6 bitcoin went from you know 68k to 60k K and Bib went from 40 to over 80 at its peak. Um you can also observe this you know different behavior in times of uh bullishness in in the crypto market where you know Bitcoin goes up and B viv also goes up with it. Uh so that's kind of what you saw in the last couple days. Bitcoin was at what 62 63k and then it popped to 66k. And so I think that's also interesting that Bitcoin rose uh perhaps on the

excitement around clarity or the prospect that clarity is is imminent and uh BV also kind of uh rose uh as as a result of that. Um and so you know this is our website chartmax finance um we have the term structure at the bottom of the page here. You can see how this has evolved over the last one to two weeks and this is the uh you know the slight elevation I mentioned um I guess between you know 14 and 30-day and there's something between seven and 14 day as well where um you know you can kind of observe this like kink in the term structure where um you know it's not just a smooth uh you know sort of typical you know V uh term structure you'd expect it's a little bit of a

there might be something that the market expects in the next you know 14 days, 30 days, 7 days. And so, uh, that's kind of how I look at it right now. And, you know, again, this is, um, you know, our our, uh, you know, platform that you can follow the indices on. >> Okay. All right. I I want to dive into this a little bit further, but before we do, let's take one more break to hear from another of our sponsors. >> If you hold crypto on your phone, your biggest vulnerability isn't your wallet, it's your carrier. AT&T, Verizon, and T-Mobile have been breached again and again, and SIM swaps are still one of the easiest ways for attackers to drain accounts. That's where Cape comes in.

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Bits and Bips channels on X, YouTube, Spotify, Apple Podcast, or wherever you get your podcasts, go there and subscribe now. For the next few weeks, we'll play segments of the full interviews on Unchained as a reminder, but for now, you'll only hear those short segments of Bits andBips on Unchained. No more full episodes. You can get links to all of the dedicated channels with the full episodes at unchainedcrypto.com/bitsandbbits spelled Bips. Thanks again. >> All right. So, we were just talking about your your be of index, but one thing I find really interesting is that you have one um specifically related to um options on

IBIT, which should have very little um delta visav bitcoin itself, but nature of financial products, it does. I'm just curious before we get into a couple of other assets. Is there anything is there any interesting divergence between your your IBIT product and and BV and if so what what might that mean? >> So we have the BV index as you mentioned and the BV US index. The BV index tracks the global spot options market derabit OKX it looks at these type of venues and kind of aggregates this um you know single number that you know looks at the entire uh global options market. about six months ago. So, Biv is about about four four years old now. Um about six

months ago, we rolled out the BV US index on the back of the success for the IBIT um options. And you know, IBIT options launched at the end of 2024 um in November and have quickly become, you know, the dominant form factor for Bitcoin options in the US market. Um and so you know the regulated ETF options market and the uh you know offshore uh market are are roughly the same size. They're both uh about 25 billion uh on any given day uh recently. And you know basically we you can observe that the BV index is a couple points below the B of US index. This is largely attributed to you know small premium for uh you know

really like transparency and like you know the clearing house setup of the equity options exchanges in the in the US market. So you'll think BV US is at 42 and BV's at 39 something like this. And so there is a small you know premium on the on the sort of IBIT index. Um but largely the the performance of the indices is very very similar and um you know it's something that we pay close attention to. We've published a lot of research on uh you know the growth of the IBIT options market and something we're we're tracking closely. It's it's a very interesting um you know to juxtapose the two markets and two indices. Okay. And uh we spent a lot of time talking about Bitcoin, but as you mentioned u in some of your earlier

remarks uh for every every token has something at stake with the clarity negotiations, but I guess one could probably argue Bitcoin has the least given that it's pretty settled as a as a commodity and um just sort of by design its rigid nature. There's there's less like onion activity you can do with Bitcoin beyond just sending it back and forth. Uh I want to kind of get your sense of what's happening with ETH um Salana um some of the other major alt ones where uh I mean aside from just perhaps getting a little bit of clarity on which regulator has has privacy uh there's a lot at stake in particular for DeFi and and some of the sort of activities that you can do on top of these multi-purpose blockchains. So are

are traders positioning themselves differently uh related to these uh for these tokens related to Bitcoin? What does your platform tell you? >> In general, I think that, you know, Bitcoin is bonafideed and, you know, clearly under the CFTC's remmit based on previous administrations and in the sort of, you know, regulatory seats and and sort of things that they've said. And so, Bitcoin is is very clearly a commodity. I think ETH, you know, is also is also very similar in in that regard. But a lot of the things that are built on top of Ethereum and Salana stand to benefit and maybe things like Hyperlquid and and Lighter and others stand to benefit from the Clarity Act and the increased clarity in in the

ecosystem. I think that you know it's it's nebulous you know how certain things are are regulated um you know what is um you know security what is a broker and the clarity act brings uh transparency and clarity to those those areas and so I do think that um you know uh Ethereum and and Salana ecosystems hyperlid have a lot to gain from this act uh the statute going through and um you know it's very interesting to see how the market will react to that. I mean, you've seen in recent days that on a 7-day time frame, Ethereum is up uh almost a percent and Bitcoin is is roughly up half a percent. And so, this might be indicative of the fact that,

you know, um Ethereum and and and other smart contract platforms as well as other, you know, decentralized applications and exchanges have a lot to gain from the Clarity Act uh going through. So, um you you might see this in the in the EV index if I if I look um real quick. Um the EV index is up uh you know uh you know around the same amount of percentage points and and you know as BVIV but um you can definitely see this in the Ethereum price and the the soul price and the hype price. Um and so it's going to be interesting to see how you know the broader market reacts to you know clarity uh going through and the prospect of it going through.

What what is the longest term duration of of contracts that your uh index tracks? >> Uh it is 180 days. We should roll out at 360. That would be cool. >> Okay. All right. So, I mean that pretty much gets us to the end of the year, which is where I I kind of wanted to take this next. Uh I was looking a little bit at oil futures before we went on. And again, it's it's a very I say this I feel like I say this a lot on the show, but it's a there's many different ways to look at the world. Uh I mean, for one, um rates are are hiking across um like two years, 10 years. Bonds are suffering there. Bonds are suffering. Um traders are anticipating rate hikes

across the world uh over fears that the Iran conflict which has now I guess moved from the straight up formoose into also the um the Red Sea and and what all that means. People are bracing for a rough couple of months but but oil oil futures time towards the end of the year are actually relatively muted and and not too far up from from uh sort of where they sit today. And I'm wondering what crypto is telling you when it the end of the year. Um like do we see a big run up into 100k? Uh and I know you're you don't look at particular price but like are they expect our crypto um are your models predicting a lot of

volatility between now and the and the end of the year? I would anticipate given that we've been in a crypto winner and hopefully it's bottomed out that if there is a lot of volatility that would mean um volatility to the upside not the downside. >> When I look at the term structure for BVIV I don't observe anything that that jumps out to me as you know elevation in the in the term structure as you might see with the clarity in the next couple of weeks. Um although definitely I think that um you know by end of the year crypto could look a lot different like I mentioned there's a strong institutional appetite for tokenization blockchain as infrastructure um stable coins right now and then that could translate back into

you know the the liquid um majors uh Salana Ethereum Bitcoin and so um I think it's you know it's a very interesting you know regime we're in right now very institutional regime and I think that um the market could could look a lot different by end of the year. There's definitely a lot of appetite for um you know institutional pilots and everything right now and um nothing jumps out in the actual term structure for the BVIV index but um I know I've gut feeling I think that the market um could shape up a lot. >> Okay. All right. Before we wrap I want to talk a little bit about prediction markets. So so you have a partnership with Poly Market. Could you just kind of walk me through the terms of that please?

Essentially um you know Volmex and Poly Market have a collaboration um our indices are available to trade on Poly Market. There's a monthly tenor, a yearly tenor and essentially we're partnered uh you know a partner of Poly Market that makes uh you know a robust mission critical volatility index tradable in the prediction market format. And so um it's been live for the last couple of months. uh traders that would like to express a view on volatility increasing or decreasing can use these contracts to easily uh to hedge or speculate or other different strategies that are more uh you know more um you know sophisticated. Um but essentially uh Volmex indices are

available to trade on polyarket.com and uh you know we're a big fan of the poly market platform and think they're doing important work making you know derivatives um more accessible and intuitive for you know retail protail and even institutional investors. So uh very excited about that. Um, right now there's a a BV and EV um contract expiring in the next uh 8 days and so something to pay attention to as the expiration is kind of a forcing function for price discovery. >> Yeah. And I'm really curious to uh I mean if you're seeing anything kind of noteworthy on how um those contracts are are trading it we always uh I've long looked at the CB Fed watch tool and and now it seems like like poly markets uh

markets for pricing sort of the next Fed rate moves are sort of quoted side by side with with CME. So I I I'd love to kind of hear how people are using that product and and in particular I wonder too like how just the rise of different things that you can bet on um in relation to poly market how that changes the way people use your product or or how you might try to develop it in the future. I mean, I was just looking on poly market now and uh I mean like you could look at bet on things like an Iran coup attempt. You could you could bet on things like like a like a ceasefire. Um you can bet on prices that that I I mean change minute by minute. There there's a lot of

different way I mean you could bet on clarity. I mean there's lots of different ways to express views on things that are related to just price volatility. So, um, yeah, I mean, how does that impact the way people are using your product? And I'm I'm really curious, too, just further out, how does that impact the way that you might try to build your company and the types of products that you launch given that there's so much demand for different flavors of of expressing um u expressing um expectations for for different price movements.

>> Yeah, thanks Steve. I think poly market and prediction markets broadly are a very intuitive form factor for a lot of different investors and traders. Um it's really distilling markets down to a green button and a red button that you know buy and sell and give you some implied probability of of something happening and you can take a stance on a pure event um you know something happening in uh in the markets in culture in geopolitics in predict you know political markets um and so essentially I think that this makes it really easy for investors and traders to take a stance on a particular issue without you know dealing with the cumbersome and arduous you know process

of trading options which obviously we we love options and our product is is predicated on options but it's it's quite complicated for a lot of investors and traders and so poly market really distills that down into a very simple user experience and I think this has been a you know a very successful collaboration so far where um you know our indices are are tradable in the very you know simple format of a prediction market and you know typically If you're a retail investor in the US and you want to trade um the VIX, you might need to trade the VIX options. And so that's much more complicated uh product and it's really, you know, it simplifies things to um you know, to have a uh you know, a volatility index in a in a in a prediction market wrapper. And so I

think that this unlocks um you know just a lot of uh you know new product offerings for us um specifically making BVIF tradable on different teners. You know uh we have one month and one year that are currently available on on poly market but I think that um you know there could be surface area to have shorter duration contracts that are you know expiring in a matter of days. Um I think that as we create new indices, this is a really uh great um medium for for trading them and uh you know commercializing them. And so I think that we think a lot about prediction markets and um you know it's a really great product that um it's it's you know I liken it to the the innovation of

perpetuals, right? I mean perpetual has really changed the landscape for crypto derivatives and I believe that um you know prediction markets is a you know another generation of that with um you know making it really easy to trade all sorts of assets and so poly market's doing great work there's a number of other exchanges um doing great work in the space and it seems like every day more and more incumbents um kind of enter the prediction market space and have uh some plans to to get involved there and so um I think it's a you know we think a lot about perpetual future futures and you know regulated mediums for trading our indices but also prediction markets is becoming a pillar of sort of the go to market strategy. So um it's something we're really excited

about and um I think it's you know it's a great development. >> All right. Great. Well, we'll have to kind of stay tuned and and keep watching it because I I think Raiden there's a lot of exciting opportunities for for someone like uh for someone like you and then the products that you offer. Uh so we'll have to keep watching there. And uh you mentioned PERPS. I think I'd be remiss not to uh at least acknowledge uh BitMax in the news that it was shutting down today. I mean, they essentially like I wouldn't necessarily say they created PERS, but they definitely um brought them to crypto and and nowadays per dominate um crypto derivatives. So, it's a uh so it's it's a a sad day for them, but but they can clearly hold

their heads high um based on what they were able to to create. Uh we're going to have to leave it there. Uh, lots to cover, lots to um, continue watching. Uh, I'm going to pay particular attention to your 14-day uh, time horizon given how closely lines up with the August recess for the Senate. Uh, clarity still seems like it could go either way. I know Poly Market and some of the other prediction platforms have it at I think somewhere 30 to 40%. That that'll change eight times by the time someone listens to this on Apple Podcast or Spotify. But a lot of work to do.

Hopefully, we're going to see um some positive movement because I think it would be beneficial to to everyone in the community. Uh Cole, thank you for joining. Are there um any last thoughts that you'd like to share with the audience? >> Thanks, Steve. Um it's been great to be here. Thanks as always. And um I would say check out our indices uh chart stuff. Almex Finance or Volmex Finance or on Trading View, Bloomberg, Refinitiv. Um and let's see how uh you know clarity uh the August recess um you know evolves and um there might be some interesting moves in the market in Bitcoin and ETH and Salana and different tokens. So it's an exciting time and look forward to next time.

>> Yeah, absolutely. Uh thank you to everybody for watching and listening today. Uh that wraps up this week's episode of Bits and Bips the Interview, but uh come back again same time next week where we'll have another exciting guest. Have a good day. Hey, hey hey. Hey,

hey hey.