As we delve into the universe of cryptocurrencies and their ever-changing dynamics, Bitcoin remains a key player, consistently grabbing headlines. Despite a mixed performance, with the top-notch digital currency failing to capitalize on the SEC’s recent decision to drop lawsuits against crypto exchange Coinbase, Bitcoin yet again managed to rally past $96,000. The recent activities around Bitcoin hint at some interesting movements on the horizon, particularly given the historical low levels reached by certain volatility metrics. In this discussion, we aim to explore this volatility trend and decode its potential implications on Bitcoin’s price performance in the coming weeks.
Is Bitcoin Poised for a Price Jump?
Insights from Glassnode, a renowned crypto analytics firm, highlight how two key volatility parameters hitting historically low values could affect Bitcoin’s price and its future trajectory. These parameters are the “realized volatility” of one week and the “options implied volatility”.
To give you some insight, realized volatility, also known as historical volatility, assesses the extent of an asset’s price change over a specified period. In our case, the asset is Bitcoin. On the other hand, implied volatility is a measure that determines the likelihood of future shifts in an asset’s price.
Data from Glassnode points to the 1-week realized volatility of Bitcoin recently landing at 23.42%. The firm’s on-chain intelligence suggests that the current value of this metric is basking near historical lows. In the past four years, Bitcoin’s realized volatility has seen only a few dips below this level.
Source: Glassnode / X
It’s noteworthy that Bitcoin’s 1-week realized volatility metric dipped to 22.88% and 21.35% in October and November of 2024 respectively. In these instances, these levels have acted as bottoms, triggering the metric to bounce back. Historically speaking, such decreases in realized volatility often precede major price shifts, hinting at a potential breakout or even a correction.
Source: Glassnode / X
Simultaneously, Glassnode reports a notable drop in Bitcoin’s 1-week options implied volatility, reaching a low of 37.39%. This level is edging closer to the multi-year lows last seen in 2023 and the early part of 2024. The last time implied volatility hovered around this level, Bitcoin experienced significant market movements.
However, it’s important to note that the longer-term options implied volatility displays a different trend altogether. The 3-month implied volatility stands roughly at 53.1%, while the 6-month indicator is close to 56.25%, implying that the market participants are expecting increased volatility in the forthcoming months.
Bitcoin Price Snapshot
At the time of writing, Bitcoin’s price stands at approximately $95,340, reflecting a drop of over 3% in the past 24 hours.
The price of Bitcoin on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
FAQs
What factors could influence Bitcoin’s price in the future?
Multiple factors such as regulatory policies, market sentiment, technological advancements, and volatility measures could significantly influence Bitcoin’s future prices.
How reliable are volatility metrics in predicting Bitcoin’s price movements?
While volatility metrics offer useful insights and can hint at potential price movements, like all predictive measures, they’re not foolproof. They should be used in combination with other factors for making well-informed investment decisions.
What is the significance of ‘options implied volatility’?
The ‘options implied volatility’ metric predicts the likelihood of future changes in an asset’s price based on the prices of the asset’s options. It’s a useful indicator for investors as it hints at expected market volatility.
What could be the possible impact of low volatility levels on Bitcoin’s price?
Historically, low volatility levels have often been succeeded by significant price movements in the asset. However, the direction of these movements is uncertain and could either lead to a breakout or a correction.
