Volatility Levels Paint A Bullish Picture
Paint Drying
Over the past few weeks, watching Bitcoin’s price action has been akin to watching paint dry. Earlier this week, bitcoin’s 30-day realized volatility reached levels not witnessed since July 2020.
I shared the chart below in Wednesday’s market update. I noted that historical data indicates that such drawdowns in volatility often precede significant price movements. Recognizing the importance of this insight, we decided to delve deeper into the numbers, seeking to quantify the magnitude of these moves and understand their typical direction.
Below is the entire history of Bitcoin’s 30-day realized volatility. We marked each instance of this measure falling below 25% with a vertical green line. This level is just below the 1st decile of 30-day bitcoin volatility (32%).
Oddly, this happened quite often in the run-up to 2015 and 2016 but only twice in the last 3 years. Note that if volatility fell below 25% again within 30 days, we did not count this as another instance of crossing that threshold. In all, there have been 11 instances of volatility reaching the sub-25% zone.
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