Bitcoin’s Calm Before the Storm
In February, something unusual happened in the world of Bitcoin. Its volatility, which is like its moodiness, dropped to almost the lowest it’s been in 8 months. This means Bitcoin’s price wasn’t jumping up and down like it usually does. Let’s explore what this calm means and what might happen next.
What’s Volatility?
Volatility is like Bitcoin’s temper. When it’s high, Bitcoin’s price goes up and down a lot. When it’s low, like now, Bitcoin’s price is more stable. There are two ways to measure Bitcoin’s volatility:
- Realized Volatility: This shows how much Bitcoin’s price has changed in the past. Right now, it’s at one of its lowest points in years, around 32%.[2]
- Implied Volatility: This shows what traders expect Bitcoin’s price to do in the future. Right now, it’s below 50%, which is quite low.[2]
Why Low Volatility Matters
When Bitcoin’s volatility is low, it’s like a rubber band that’s been stretched too tight. It can’t stay like that forever. It’s going to snap back, either up or down. This has happened before:
- In the past, when Bitcoin’s volatility was low, its price moved by at least 20-30% in the next few weeks.[4]
- An indicator called Bollinger Bands Width is at its lowest since 2012, showing that Bitcoin is ready for a big move.[4]
What’s Next for Bitcoin?
We don’t know for sure if Bitcoin’s price will go up or down next, but some things might give us clues:
- US Dollar Strength Index (DXY): Usually, when the DXY goes up, Bitcoin’s price goes down. But recently, even though the DXY has gone up, Bitcoin’s price hasn’t changed much.[4]
- Institutional Demand: Big investors haven’t been buying much Bitcoin lately, which might mean they’re waiting for a big change in price.[4]
- Political Events: Sometimes, what happens in the world can affect Bitcoin’s price. For example, when Donald Trump became president in 2017, Bitcoin’s price went up a lot.[4]
A Storm is Coming
Bitcoin’s volatility is so low right now that something big is bound to happen soon. Whether Bitcoin’s price will go up or down depends on what happens in the world and what investors think. But one thing is sure: the calm won’t last forever. The next move could be big and sudden, so everyone’s watching closely.
Sources: CoinDesk, Bitcoin Magazine, Veterans in Trucking, Gallagher Insurance