How Do Changes in Electricity Futures Prices Correlate with the Implied Volatility of Bitcoin Options?

Changes in electricity futures prices, especially in regions with significant mining activity, show a growing positive correlation with the implied volatility of Bitcoin options. A sharp increase in electricity futures suggests higher future mining costs.

This can compress miner profit margins, potentially forcing less efficient miners to shut down, which reduces network security (hash rate). Traders price this increased uncertainty about the future cost of production and network security into options, causing implied volatility to rise as the market anticipates potential spot price fluctuations.