• Bitcoin 7-day volatility has recently declined to the lowest value since July 2020.
• This is demonstrated in the graph provided which shows the trend in the 7-day and 30-day Bitcoin volatilities over the past year.
• Low values suggest the price of the crypto hasn’t been showing many returns in recent days.
The recent market movements of Bitcoin have been quite mundane and uneventful, with the 7-day volatility reaching its lowest value in two and a half years. According to the latest weekly report from Arcane Research, the BTC volatility has sharply declined recently, with the 7-day version of the metric currently having a value of 0.7%.
The “volatility” here is a metric that measures the deviation in the daily returns for Bitcoin from the average over a specified period. This rolling average period can be of any length, but the most useful versions of the metric are the ones taken over 7 days and 30 days. When the value of the indicator is high, it means BTC is currently observing large fluctuations compared to the average recently. On the other hand, low values suggest the price of the crypto hasn’t been showing many returns in recent days.
Naturally, trading during highly volatile periods involves more risk than in ones with stale price action, and this is why the current low volatility is a bit concerning. This is because, when the market is too stagnant and stable, it can indicate a lack of interest or enthusiasm from investors. This can lead to a prolonged period of stagnation, which can be quite damaging to the price of Bitcoin.
This is demonstrated in the graph provided which shows the trend in the 7-day and 30-day Bitcoin volatilities over the past year. Both the weekly and monthly Bitcoin volatilities have sharply declined in the last few weeks as the crypto’s price has been stuck in endless consolidation. Such low values suggest the price of the crypto hasn’t been showing many returns in recent days.
It remains to be seen if the current low volatility is a sign of the market cooling off before the next major move, or if it indicates a lack of interest from investors. It is also important to note that it is not uncommon for the market to experience periods of low volatility, and this is often followed by a period of higher volatility. As such, it is important to remain vigilant and keep an eye on the markets in order to be able to capitalize on any potential opportunities that may arise.