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Data shows that Bitcoin’s realized volatility metric has fallen to historically low levels. What generally happens after this pattern is formed?
Bitcoin’s realized volatility has recently fallen to extreme lows
In a post on X, CryptoQuant author Axel Adler Jr discussed the latest ongoing trend in Bitcoin’s realized volatility. Realized volatility here refers to an indicator that basically tells us how volatile a given asset has been based on its price returns within a specific window.
When the value of this metric is high, it means that the asset in question has experienced a large number of fluctuations during the period. On the other hand, the low indicator implies that the price action for the commodity has been stale.
Now, here is a chart showing the trend of one-week realized volatility for Bitcoin over the past few years:
BTC News
As shown in the chart above, Bitcoin’s 1-week realized volatility has recently fallen to rather low levels of around 7%. This is so extreme that only ten other cases in the last six years have seen the parameter drop the same way.
This means that the cryptocurrency’s recent consolidation has been among the tightest in its history; As for what this indicator trend might mean for the cryptocurrency, perhaps past patterns could provide some hints.
An inspection of the chart reveals that such stale price movement in the asset has generally resolved itself with a burst of strong volatility. The latest case occurred right before the rally to the new all-time high (ATH).
Given this pattern, it is possible that BTC’s recent consolidation could also lead to another sharp move for the cryptocurrency. Something to note, however, is that volatility emerging from realized volatility lows has historically gone in both directions, implying that the price movement emerging from this narrow range could very well be a collapse.
It remains to be seen how the price of Bitcoin will develop from here on out, given the historically stale action it has witnessed over the past week.
In other news, as Axel pointed out in another X post, the recent movement of the bankrupt exchange Mt. Gox has caused many on-chain indicators to show false signals.
The analyst cited the Bitcoin Corrected Spent Output Profit Ratio (aSOPR) chart as an example.
The aSOPR tracks the net profits or losses made by investors across the network. Given that Mt.Gox’s BTC has been sitting in wallets for quite some time, it is not surprising that its movement has “made” a large profit.
Of course, this indicator spike is not actually a profit taking signal, so it is not a signal that would impact the market.
Bitcoin price
Bitcoin has declined over the past day as its price has now fallen to $66,800.