Bitcoin volatility approaches historic low, market is brewing major breakthrough

Since the end of November last year, Bitcoin (BTC) has been oscillating narrowly between $91000 and $109000, with volatility significantly contracting to its lowest level in years, which may indicate that the market is about to experience severe volatility.

According to data from Glassnode, a blockchain data analysis firm, Bitcoin's two-week realized volatility (2-week realized volatility, which provides the degree of asset volatility over the past two weeks) has dropped to an annualized 32%, one of the lowest levels in many years. In addition, the one month implied volatility of the option (i.e. the market's expectation of volatility over the next four weeks) has fallen below 50% annualized, also one of the lowest levels in many years.

To illustrate the level of sideways consolidation of Bitcoin during this period, one can refer to the "Choppiness Index" on the on chain data analysis platform Checkonchain. Data shows that Bitcoin's weekly volatility index has reached its highest level since 2015, indicating that the market has entered an extreme consolidation state.

Volatility usually has mean regression characteristics, which means that when the market is abnormally stable, it often indicates that significant fluctuations in either direction are about to occur, and vice versa. The longer the consolidation time and the narrower the range, the more intense the final volatility outbreak will be.

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