Calm Before The Storm? Bitcoin Volatility At Historically Low Levels
October 06 2022 - 3:00PM
NEWSBTC
Data shows the Bitcoin 7-day volatility has plunged down recently
to pretty low values. Here’s what has historically happened
following instances of such a trend. Bitcoin 7-Day Volatility Has
Declined To Just 1.6% In The Past Week According to the latest
weekly report from Arcane Research, the recent sideways trend in
the BTC price has lead to the volatility dropping down to very low
values. The “volatility” is an indicator that measures how the
daily returns of Bitcoin have deviated from the average during a
specific period. Here is a chart that shows the trend in the 7-day
and 30-day versions of the metric for BTC over the last year: The
7-day value of the indicator seems to have gone down in recent days
| Source: Arcane Research's The Weekly Update - Week 39, 2022 As
you can see in the above graph, the 7-day Bitcoin volatility has
plummeted down over the past week or so. The metric’s value is now
only 1.6%, a very low level that has only been seen a few times
during the last twelve months. The 30-day volatility, though, has
still stayed up recently at about 3.4%. Related Reading: Low
Volatility Crypto Market Supplies Surprisingly Stable State Of Fear
The reason behind such low weekly values of the indicator is the
sideways consolidation between the $19k and $20k levels that the
crypto’s price has been stuck in lately. Such low 7-day volatility
values have usually been succeeded by significant surges in the
metric, as noted by the report. This happens because leverage
easily builds up during these periods. High leverage markets are
highly volatile since any sudden price moves can liquidate large
amounts, which further amplifies the price change. Related Reading:
Bitcoin Bulls Snap Back With The Bollinger Bands | BTCUSD Analysis
October 5, 2022 Since low volatility periods obviously don’t have
any significant price spikes, leverage can go unflushed and thus
pile up. As the Bitcoin 7-day volatility has been very low
recently, this kind of buildup is again expected to take place in
the market. And indeed, the BTC-denominated perpetual futures open
interest has shot up and is sitting at an all-time high right now,
supporting the idea of the market being overleveraged: Looks like
the value of the metric has been climbing up recently | Source:
Arcane Research's The Weekly Update - Week 39, 2022 BTC Price At
the time of writing, Bitcoin’s price floats around $20.1k, up 3% in
the last week. Over the past month, the crypto has gained 1% in
value. The below chart shows the trend in the price of the coin
over the last five days. The value of the crypto has been moving
sideways since the surge a couple of days back | Source: BTCUSD on
TradingView Featured image from Kanchanara on Unsplash.com, charts
from TradingView.com, Arcane Research
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