• Bitcoin 7-day volatility has declined to its lowest value since July 2020, sitting at 0.7%.
• According to Arcane Research’s latest report, both the weekly and monthly Bitcoin volatilities have sharply declined in the last few weeks.
• Trading during highly volatile periods involves more risk than in ones with stale price action.
The cryptocurrency market has been in a state of stagnation for some time now, with Bitcoin’s price stuck in endless consolidation. This has caused the Bitcoin 7-day volatility to drop to its lowest value since July 2020, now sitting at 0.7%. According to the latest weekly report from Arcane Research, the BTC volatility has sharply declined in recent weeks.
The “volatility” metric 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.
The 7-day and 30-day Bitcoin volatilities have both declined sharply in the last few weeks. This suggests that the crypto’s price has been stuck in an endless period of consolidation. This can be seen in the chart provided by Arcane Research’s “Ahead of the Curve” report for January 3rd, which shows the trend in the 7-day and 30-day Bitcoin volatilities over the past year.
Naturally, trading during highly volatile periods involves more risk than in ones with stale price action. The current low volatility period means that there is less risk involved in trading Bitcoin, however, it also means that there is less potential for high returns. Although the current situation might be beneficial for some traders, it may not be ideal for those who are looking to make a quick profit or are more risk-averse.
Ultimately, the low volatility period that Bitcoin is currently in could be a sign of a larger trend in the crypto market or it could just be a temporary blip. Only time will tell if the crypto market will remain in a state of stagnation or enter into another period of high volatility.