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Since its inception, Bitcoin has (virtually) at all times been the poster youngster for volatility. Yet, the Bitcoin value is hardly shifting in any course in the intervening time. But the newest information suggests a shocking twist within the story.

As per a current report by on-chain information supplier Glassnode, “Bitcoin markets are experiencing an incredibly quiet patch, with several measures of volatility collapsing towards all-time lows.” This raises the query: Are we coming into a brand new period of Bitcoin value stability, or is the market misreading the indicators?

Historical Context For The Volatility Of Bitcoin

To really perceive the present state of the market, it’s important to delve into the historic context. The Glassnode report notes, “It has been 842-days since the bull market peak was set in April 2021.” During this era, Bitcoin’s restoration has been extra sturdy than in earlier cycles, buying and selling at -54% under its all-time excessive (ATH), in comparison with a historic common of -64%.

Drawing parallels with previous cycles, the report highlights that each the 2015-16 and 2019-20 cycles underwent a “6-month period of sideways boredom before the market accelerated above the -54% drawdown level.” This may very well be indicative of an analogous “boredom” section within the present cycle.

One of essentially the most placing revelations from the Glassnode report is the acute volatility compression Bitcoin is at the moment present process. “Bitcoin realized volatility ranging from 1-month to 1-year observation windows has fallen dramatically in 2023, reaching multi-year lows.” This is paying homage to 4 distinct intervals in Bitcoin’s historical past, together with the late stage of the 2015 bear market and the post-March 2020 consolidation following the outbreak of COVID-19.

Following the livid rally firstly to 2023, the worth efficiency on each a quarterly and month-to-month foundation has moderated. This mirrors Bitcoin’s earlier cycles the place the preliminary surge from the low is powerful, however then transitions into a protracted section of uneven consolidation, a section of re-accumulation.

Furthermore, the report states, “The price range which separates the 7-day high and low is just 3.6%. Just 4.8% of all trading days have ever experienced a tighter weekly trade range.” The 30-day value vary is much more excessive, constricting value to only a 9.8%, and with solely 2.8% of all months in BTC’s historical past being tighter. Such ranges of value compression are uncommon for Bitcoin, suggesting an anomaly or a possible precursor to a major market transfer.

Derivatives Market Insights

The derivatives market, typically seen as a barometer for underlying asset sentiment, can also be echoing this quiet spell. “The combined Futures and Options trade volume for [BTC and ETH] are at, or approaching all-time-lows,” the report notes. This is additional emphasised by the truth that “BTC is currently seeing $19.0B in aggregate derivatives trade volume, whilst ETH markets have just $9.2B/day.”

Interestingly, the choices market is displaying indicators of a major “volatility crush.” As per Glassnode, “Options are pricing in the smallest volatility premium in history, with IV between 24% and 52%, less than half of the long-term baseline.” This is additional corroborated by the traditionally low Put/Call Ratio and the 25-delta skew metric, suggesting a web bullish sentiment available in the market.

The crux of the matter lies in deciphering these indicators. The report aptly questions, “Given the context of Bitcoin’s infamous volatility, is a new era of BTC price stability upon us, or is volatility mispriced?” Historically, intervals of low volatility in Bitcoin have typically been adopted by important value actions. Whether it is a calm earlier than a storm or a real shift in direction of a extra secure Bitcoin stays to be seen.

But as Tony “The Bull”, the chief chart technician at NewsBTC, has pointed out yesterday, the technical indicators are additionally pointing to a protracted interval of re-accumulation, that means that the section of low volatility is prone to proceed for a while to come back.

At press time, the BTC value was at $29,277.

Featured picture from iStock, chart from TradingView.com