Is Bitcoin Price Volatility Coming – Bitcoin Magazine

by James · November 20, 2022

Below is an excerpt from a recent issue of Bitcoin Magazine Pro, Bitcoin Magazine premium market’s newsletter. To be among the first to receive this insight and other market analysis on the bitcoin chain straight to your inbox, Subscribe now.

Lack of volatility

One of the worrying dynamics in the market right now that we want to focus on is the lack of volatility. The high period of spot volume activity and relatively lower derivatives activity has really done little to move the price, and bear markets are known to test market participants’ patience when it comes to duration. We did get some volatility with the latest consumer price index (CPI) inflation pressure, but bitcoin’s historical volatility remains at record lows.

Now everyone wants to see this bitcoin price range break one way or another; a larger range accumulation usually leads to a larger breakout move. It’s really something to see bitcoin’s historical volatility below the UK gold market, but now it’s even below the average stock and bond ETF. This is when you know the market has completely turned around. Either that speaks to a lack of interest in bitcoin right now with a much bigger move underway, or bitcoin’s entire asset profile has suddenly changed. We lean towards the former and history has shown that this record low level of volatility does not last long and has led to some pretty significant price breakouts and collapses.

Even implied volatility in the market via option pricing is at some record lows (and falling) over various durations.

Source: Glassnode

In the four significant events of low-percentile historical volatility, we’ve seen three moves with upside breakouts and a significant decline to new lows back in 2018. It’s a small sample size to draw directional conclusions from, but a big move seems to coming soon, and the 2018 price analog is one we’ve discussed before — especially given our expectations for the S&P 500 to see lower lows from here before this cycle ends. To quote an earlier piece, “What to Expect When You Expect Volatility”:

“While the lack of recent volatility in bitcoin may be a sign that much of the leverage and speculative mania in the bull market has all but washed out, our eyes remain on the oversized legacy markets for signs of fragility and volatility, which could serve as short- to medium-term headwinds aim.”