Bitcoin’s weekly volatility reached all-time lows as the crypto exchanges hands at $20,700 following a modest relief rally thes week.
Compiled by crypto exchange BitMEX, Bitcoin’s historical volatility (BVOL), reached 16 points, a figure not seen in the ticker’s recorded history. When volatility registers below 25 points, it rarely sits there for long as the metric is indicative of a sizeable price move.
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In Nov. 2018, a 16.8 reading on the index was followed by a 40% price drop in 5 weeks. That price drop signalled the ultimate bottom and would later be known as the final capitulation event of the fork-war bear market.
The following year in March 2019, BVOL registered 25.6. This reading was followed by a 630% increase in the price of Bitcoin over a 14-week period.
Fast forward to August 2020 and histrical volatility reached 21.2, after which Bitcoin rallied 653% to $60,000 in 38 weeks.
Bitcoin‘s historical volatility currently sits at a record low of 15.9. It remains to be seen whether the cryptocurrency will rally or drop precipitously over both short and long term time horizons. But Bitcoin’s stable $20,000 price, which has lasted 19-weeks so far, is unlikely to hold for much longer (if history is any indicator).
Voltaility contractions tend to act as a winded coil, filled with potential energy. When the contraction period ends, it’s typically followed by a directional impulse – much like physics. This useful tool does not exist in a vacum, however, as there are various metrics investors and traders consider.
The clock is ticking.
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