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Data shows that Bitcoin has been more stable than Gold, DXY, Nasdaq and S&P 500 lately, here’s what history says could come next.
Bitcoin 5-Day Volatility Has Dropped Below Gold, DXY, Nasdaq, and S&P 500
This is according to the latest weekly report of Secret investigation, BTC has already been more stable than these assets for a record length of time this year. The “inconstancy” is an indicator that measures the deviation of daily returns from the average for Bitcoin.
When the value of this metric is high, it means that the crypto has recorded higher returns compared to the average, suggesting that the coin has been carrying higher trading risk recently. On the other hand, low readings imply that there have been no significant swings in price over the past few days, showing that the market has been stale.
Now, here’s a chart showing the trend in 30-day volatility for Bitcoin over its entire history:
The value of the metric seems to have plunged in recent days | Source: Arcane Research's Ahead of the Curve - January 10
As can be seen in the chart above, Bitcoin’s 30-day volatility is currently at a very low level, as the price has been trading mostly sideways for the past few weeks. The indicator’s current values are the lowest since 2020, but they are still above some of the lows of previous bear markets.
A consequence of this recent flat move is that BTC has become more stable than assets like goldDXY, Nasdaq and S&P 500. To compare the volatility of these assets, the report used 5-day volatility (and not 30-day or 7-day volatility).
The table below highlights the periods in BTC’s lifetime where the crypto’s 5-day volatility was simultaneously lower than all of these traditional assets.
Looks like such occurrences have been a very rare event | Source: Arcane Research's Ahead of the Curve - January 10
As the table shows, there have only been a handful of instances where Bitcoin 5-day volatility has been lower than Gold, DXY, Nasdaq, and S&P 500 at the same time. The report labels such events as periods of “relative volatility compression”.
It seems that before the last streak, the highest duration of this trend was only 2 consecutive days. This means that the current relative volatility compression period is already the longest ever in the currency’s history.
Another interesting fact in the table is the total return in Bitcoin observed in the 30-day period following the first date of the volatility compression in each of these cases. All but one event (September 29, 2022) all other periods of volatility compression were followed by highly volatile price and large returns.
It now remains to be seen whether a similar pattern will follow this time around, with Bitcoin experiencing a wild feel for the next 30 days following this seriously flat price action.
At the time of writing, Bitcoin is trading around $17,400, up 3% over the past week.
BTC has surged in the last few days | Source: BTCUSD on TradingView
Featured image of Jievani Weerasinghe at Unsplash.com, charts from TradingView.com, Arcane Research