In the midst of ongoing macroeconomic instability and concerns of FTX contagion, the cryptocurrency market has recently been stable, with bitcoin stuck in a tight range of $16,000 to $18,000.
As investors with sufficient financial supply start to amass coins, the confusing peace may soon end as bitcoin’s historical volatility reaches levels last seen before the late 2020 bull run.
“The low realised volatility of [bitcoin] is indicative of the tranquil price action over the past month. This is the lowest level of realised volatility since the third quarter of 2020, just before the last bull run, excluding the period just before the FTX meltdown, which had slightly higher volatility than what we currently have. Prior to that, volatility peaked at this level at the end of the 2018 bear market, according to Blockware’s weekly analysis.
The source continued, “Calm waters do not persist long in bitcoin, so be ready for a sharp move here shortly.”
Realized volatility is the size of daily price changes over a given time period, regardless of direction. It is a backwards-looking metric, whereas implied volatility is a forward-looking indicator that shows how much price volatility options traders anticipate over the next week or month.
Last week, the annualised one-month realised volatility of bitcoin dropped to a two-year low of 38%.
The December 12 issue of Bitfinex’s Alpha report warned investors to get ready for another quick move shortly because the crypto industry is volatile and smooth sailing does not last for very long.
The analysis also noted that a spike in indicated volatility is followed by a protracted period of low realised volatility.
As of the time of publication, both the short-term and long-term implied volatility indicators are still low compared to the actual volatility. The market is not anticipating a significant shift given the low implied volatility.
After the holiday season, though, things can change as traders swoop in and buy options, driving implied volatility up in comparison to historical volatility.
Whale Accumulation Indicators
Another reason to anticipate some activity in the market is the continued stockpiling of BTC by whales, or individuals with significant cash and the power to influence markets.
Since Bitcoin dropped below the June low of $18,000 on Nov. 9, according to a Bitfinex article citing data from on-chain analytics platform Whalemap, large wallets have amassed more than 400,000 BTC ($6.73 billion).
The size of the bubbles corresponds to the number of coins the whale wallets have acquired. The white line indicates the daily close price of bitcoin (UTC).
Large or “whale-styled” wallets have received over 70,000 BTC influx over the previous week. Given the volume of purchases, about 120K BTC were amassed at the $16,100 level, which might provide support, according to Bitfinex.
At press time, bitcoin traded flat-to-positive near $16,500, according to Blockchain Gossips data.
Read More: Bitcoin’s Finally Seeing The Green. Are Whales To Give Credit?