2 - 3 minute read
As the crypto market continues to hold steady, with bitcoin locked in a narrow range between $16,000 and $18,000, there are signs that it may soon see renewed volatility. This could be due to a number of factors, including the ultra-low realized price volatility that the market is currently experiencing, and the accumulation of bitcoin by large investors, known as “whales.”
Ultra-Low Realized Volatility
According to a report from Blockware Solutions, bitcoin’s annualized one-month realized volatility fell to a two-year low of 38% last week. Realized volatility refers to the magnitude of daily price movements, irrespective of direction, over a specific period. This low level of realized volatility has not been seen since the third quarter of 2020, just before the last bull run, and prior to that, it was only seen at the bottom of the 2018 bear market.
As a result, experts are predicting that we could see a sharp move in the bitcoin market in the near future. Bitfinex’s Alpha report noted that an extended period of low realized volatility is often followed by wild price fluctuations, and advised investors to prepare for another swift move soon.
In addition to low realized volatility, the renewed accumulation of bitcoin by whales is also a cause for concern. Large investors have been snapping up BTC, with over 400,000 coins ($6.73 billion) being accumulated since the cryptocurrency fell below its June low of $18,000 on November 9th.
According to data from on-chain analytics platform Whalemap, large or “whale-styled” wallets have experienced an inflow of over 70,000 BTC in the past week alone. This accumulation of bitcoin at the $16,100 level could offer potential support, given the scale of buying.
It seems that the crypto market may see renewed volatility in the near future, due to both the ultra-low realized volatility and the accumulation of bitcoin by large investors. It is worth noting that short-term and long-term implied volatility metrics are currently depressed in line with realized volatility, meaning that the market is not currently forecasting a big move. However, this could change after the holiday season, as traders snap up options and push implied volatility higher relative to historical volatility.