The year 2020 has been notable for many people betting Bitcoin against the traditional economy, something of a good bet since it has provided higher returns to investors since the time of the market crash in March. However, over the past week, its value has been stuck between the $9k and $10k range. This restrictive movement pushed its volatility to its lowest levels in the past three months. According to data provided by CoinMetrics, the daily volatility of Bitcoin dipped under 50% and the last time this level was visited was back on 7 March 2020.
Source: CoinMetrics
Following the aforementioned instance, the price of Bitcoin plummeted by roughly 50% on 12 March as the volatility on the charts dipped. However, this wasn’t necessarily a trend that could be noted again by the market.
Bitcoin’s rolling 30-day average volatility has fallen below the 50% threshold 35 times since 2013, a year that is considered by many as the beginning of the modern Bitcoin market since that was the first time BTC breached $1k. Considering data since 2017, after charting the 35 points where the volatility dipped under 50%, it was found that 80% of those periods lasted for less than 20 days, while 55% of them lasted for less than 10 days.
Interestingly, the mean and median showed a rising volatility pattern after ten days of the dip.
Source: CoinMetrics
However, when the impact of the low volatility was compared to the price action, it presented a mixed picture. The price tends to rise sometimes and even falls sometimes, a kind of movement that kept the median and mean close to 0% for nearly 40 days.
Source: CoinMetrics
As per the explanation, a long period of low volatility price consolidation often paved the way for a big move on either side. The longer the consolidation, the more aggressive the breakout or breakdown. As the volatility dips lower, Bitcoin’s price may be gathering energy for a big price movement and with speculations of a correction in the market rife, we might see the price of the world’s largest cryptocurrency collapse in the short-term.
