Is Bitcoin Too Calm? Record Low Volatility Observed

Fidelity Digital Assets, a subsidiary of Fidelity based in Boston, reports that Bitcoin's volatility has reached a record low. While a 42% volatility level is unusual for Bitcoin, known for its high historical fluctuations, it may signal a future price rally.

Key Takeaways

Bitcoin's volatility has dropped to an all-time low of 42%.
Historically, low volatility periods in Bitcoin have preceded significant price increases.
Current steady trading may indicate accumulation before potential new highs.
The market dynamics may differ now due to the introduction of cryptocurrency ETFs.
Bitcoin is currently trading around $90,789, after a failure to exceed $95,000.

Is Bitcoin Too Calm? Record Low Volatility Observed

Main Content

Fidelity Digital Assets, a cryptocurrency-focused branch of the illustrious financial organization Fidelity, has highlighted that Bitcoin’s volatility has fallen to its lowest level ever recorded. “Realized volatility” quantifies the price changes of an asset over a designated timeframe, which, in this case, is one year.

A realized volatility score of just 42% is remarkably low for Bitcoin. Historically, this flagship cryptocurrency often had annual volatility rates exceeding 100% and even reaching above 200% during its formative years. In simpler terms, Bitcoin is currently experiencing a "boring" phase.

However, it’s important to recognize that volatility typically moves in cycles. This is not to suggest that dramatic price swings are gone forever; a reduction to 42% reflects a significant compression. It’s possible that another wave of extreme volatility is on the horizon. Bitcoin has also gone through long periods of subdued trading in previous cycles. Therefore, this unusual calmness may be misleading.

According to Fidelity Digital Assets, the current low volatility of Bitcoin could actually herald a much-anticipated price rally. A chart linked to the company’s latest social media update illustrates that historically, all-time low volatility often precedes all-time high prices. For instance, the period of low volatility in 2016 came right before the 2017 surge that saw prices reach $20,000.

The chart also indicates a recent emergence of red bars, suggesting a fresh wave of low volatility. This period of stability could signify accumulation, potentially boosting BTC to new heights.

Nonetheless, history may not repeat itself this time due to various market factors now in play, especially with the advent of cryptocurrency ETFs. Currently, Bitcoin is trading at approximately $90,789, facing challenges to rise above the $95,000 threshold.