Too Quiet? Bitcoin Volatility Hits Record Low

Fidelity Digital Assets has noted that Bitcoin’s volatility has plunged to the lowest level ever. 

“Realized volatility” measures how much an asset’s price fluctuates over a specific period (in this case, one year). A score of 42% is exceptionally low for Bitcoin, which has historically seen annual volatility exceeding 100% or even 200% in its early years.

In plain words, Bitcoin is currently “boring.” This “uncharacteristic” calm suggests Bitcoin is losing its “casino” status. It is trading within a tighter range than usual, without the violent 20-30% daily swings that characterized previous cycles.

However, it is worth noting that volatility tends to be cyclical in financial markets. It transitions from periods of high turbulence to low stability. A drop to 42% indicates extreme compression, which is comparable to a spring being coiled tight.

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A new all-time high?

Fidelity Digital Assets has identified a rare and historically bullish signal: Bitcoin has become unusually stable. 

It illustrates a technical phenomenon where periods of all-time low (ATL) volatility (red bars) act as a precursor to all-time high (ATH) prices (green bars).

For instance, the low volatility of 2016 preceded the 2017 bull run to $20,000.

The chart shows a fresh cluster of red bars appearing right now. Fidelity’s argument is that this current period of stability is a sign of accumulation that is building energy for a move to new highs. However, history might not necessarily repeat itself this time around.

Bitcoin is currently trading at $90,789, struggling to recover from a recent drop. The cryptocurrency recently failed to surpass the $95,000 level.