• Bitcoin (BTC) broke past $17,000 over the weekend and has been trading with low volatility through the first 10 days of 2021.
• BTC’s 30-day volatility has sunk to June 2020 levels and its 5-day volatility has fallen below that of gold, the dollar strength index, Nasdaq, and the S&P 500.
• This relative volatility compression in BTC has already sustained for 4 days, setting a record, as per Arcane data.
The price of Bitcoin (BTC) broke past $17,000 over the weekend, signaling a potential return to bullish sentiment. However, the market has been trading relatively flat with low volatility through the first 10 days of 2021, which is typical during a bear market. This stability is reflected by the tranquility in the derivatives market, driven by lower trading activity and indicating a reduction in speculative demand for the largest cryptocurrency by market cap, according to an Arcane Research report.
The report noted that BTC’s 30-day volatility has sunk to June 2020 levels, and its 5-day volatility has fallen below that of gold, the dollar strength index, Nasdaq, and the S&P 500. This phenomenon, referred to as „relative volatility compression,“ has only occurred five times in the past. Historically, these events only lasted for 1-2 days, but the current event has already sustained for 4 days, setting a record, as per Arcane data.
While the relative volatility compression could mean a potential short-term upside for BTC, it is still too early to determine whether this event will lead to a sustained bull market in the long-term. Arcane cautioned that the current event is unusual and that the market will likely see some volatility in the near future.
In the meantime, Bitcoin continues to be used as a store of value by investors and institutions, with the digital asset being adopted by companies such as PayPal, Square, and various banks. This continued adoption is likely to keep BTC’s price relatively stable and could even lead to a sustained bull market in the long-term. With BTC’s volatility reaching levels not seen since June 2020, investors may be wise to keep an eye on the cryptocurrency over the coming weeks.