Since the end of November last year, Bitcoin (BTC) has been oscillating narrowly between $91,000 and $109,000, with volatility significantly contracting to reach its lowest level in years, which may indicate that the market is about to experience dramatic fluctuations.
According to data from blockchain analytics firm Glassnode, Bitcoin’s 2-week realized volatility (which measures the asset’s volatility over the past two weeks) has dropped to an annualized 32%, marking one of the lowest levels in years. Additionally, the 1-month implied volatility of options (which reflects market expectations of volatility over the next four weeks) has fallen below an annualized 50%, also one of the lowest levels in years.
Source: Glassnode
To illustrate the extent of Bitcoin’s consolidation during this period, one can refer to the “Choppiness Index” on the on-chain data analysis platform Checkonchain. The data shows that the Choppiness Index for Bitcoin on a weekly level has reached its highest level since 2015, indicating that the market has entered an extreme consolidation phase.
Source: Checkonchain
Volatility typically exhibits mean-reverting characteristics, meaning that when the market is unusually stable, it often signals an impending significant fluctuation in either direction, and vice versa. The longer the consolidation period and the narrower the range, the more intense the eventual volatility breakout will be.
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