The price of Bitcoin was on the verge of reaching $100,000 on Friday, fueled by positive news from the United States Securities and Exchange Commission (SEC) dropping a lawsuit against crypto exchange Coinbase. However, the momentum was short-lived as the ByBit exchange fell victim to a $1.4 billion exploit, causing the premier cryptocurrency to hover around $96,000. Recent on-chain data indicates that certain volatility metrics are approaching historically low levels, raising questions about how this trend could impact Bitcoin’s price performance in the coming weeks.
In a recent analysis by crypto analytics firm Glassnode, two key volatility indicators, 1-week “realized volatility” and “options implied volatility,” were highlighted as nearing historically low levels. Realized volatility measures the extent to which the price of an asset, in this case, Bitcoin, has fluctuated over a specific period. On the other hand, implied volatility assesses the likelihood of future price changes.
Glassnode reported that Bitcoin’s 1-week realized volatility had dropped to 23.42%, nearing historical lows. Similar drops in realized volatility have preceded significant price movements in the past, potentially signaling a breakout or correction. Additionally, the 1-week options implied volatility also saw a significant decline to 37.39%, close to multi-year lows. The last time implied volatility was at this level, Bitcoin experienced substantial market movements.
It is important to note that while short-term implied volatility is low, longer-term options implied volatility for 3-month and 6-month periods is higher, indicating expectations of increased volatility in the coming months. As of the latest data, Bitcoin is trading at around $95,340, reflecting a 3% decline in the past 24 hours.
Overall, the convergence of low realized and implied volatility metrics suggests that Bitcoin may be on the cusp of a significant price movement. Market participants will be closely monitoring these indicators to gauge the potential direction of the cryptocurrency in the near future.