Analyst Note: Low BTC Volatility - Aberration or New Normal?

Key Insights

• Despite elevated volatility in larger, more traditional markets, Bitcoin's (BTC) realized volatility is at its lowest level in over 2 years.
• Based on Bitcoin’s fundamental characteristics, record futures open interest (leverage), and past price action, it’s likely that this period of low volatility will come to an end soon.
• Moderately long positioning and a deteriorating economic outlook increase the likelihood of another leg down.

Everyone has an opinion on Bitcoin’s dizzying volatility. Depending on whom you ask, it’s either a brilliant feature or a ruinous bug. However, almost all market participants have been left scratching their heads after the last few weeks of price action. Despite major macroeconomic events and elevated volatility in traditional markets, Bitcoin’s volatility has dipped to levels seldom seen in its 13-year history.

Fortunately, there is some precedent, and we have tools to color our understanding. That said, this appears to be a familiar bout of compression, not a fundamentally new regime.

Low Volatility: Examined