BTC is Currently more Stable than Gold, Nasdaq, S&P 500; Volatility Could Follow

Bitcoin’s 5-day volatility has fallen below all of these indexes simultaneously — referred to as “relative volatility compression” — only 5 times in the past.

Over the weekend, the price of Bitcoin (BTC) surpassed $17,000. However, through the first ten days of 2023, it has traded relatively flat with low volatility, as is typical during a bear market.

The tranquillity in the derivatives market reflects BTC’s stability, which is driven by lower trading activity. According to an Arcane Research report, this indicates a decrease in speculative demand for the largest cryptocurrency by market cap.

According to the report, BTC’s 30-day volatility has dropped to June 2020 levels. While Bitcoin’s price is relatively stable, its 30-day volatility has reached lows last seen in 2013, 2015, 2016, 2018, 2019, and 2020.

As a result, measured by 5-day volatility, Bitcoin is now more stable than gold, the dollar strength index, the Nasdaq, and the S&P 500.

Bitcoin’s 5-day volatility has fallen below all of these indexes simultaneously — referred to as “relative volatility compression” — only 5 times in the past. Historically, BTC’s relative volatility compression lasted only 1-2 days.

According to Arcane data, the current relative volatility compression event has already lasted four days, setting a new record. As a result, the current relative volatility compression is unusual, according to Arcane.

Except for the relative volatility compression on September 29 of last year, all such events have historically been followed by sharp volatility over the next 30 days. As a result, Bitcoin is likely to experience significant volatility in the coming month.

With the current decline in Bitcoin volatility, Arcane noted that the implied volatility of Bitcoin options has also reached an all-time low. Straddle strategies have become more appealing as investors can “use cheap options premiums to position for abrupt market moves,” according to Arcane.