Data shows that bitcoin's realized volatility metric has fallen to historically low levels. What usually happens after this pattern forms?
bitcoin Observed Volatility Has Declined to Extreme Lows Recently
in a x.com/AxelAdlerJr/status/1796455451137380361″ target=”_blank” rel=”nofollow”>mail At x, CryptoQuant author Axel Adler Jr has talked about the latest trend taking place 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 amount of fluctuations during the period. On the other hand, the low indicator implies that price action has been stagnant for the commodity.
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Now, here is a chart showing the trend in 1-week realized volatility for bitcoin over the past few years:
As shown in the chart above, bitcoin's 1-week realized volatility has recently decreased to fairly low levels of around 7%. This is so extreme that only ten other cases in the last six years have the metric dropped in a similar way.
This means that the cryptocurrency's recent consolidation has been among the tightest in its history; As for what this trend in the indicator could mean for the cryptocurrency, perhaps past patterns can provide some clues.
An inspection of the chart reveals that that stagnant asset price action has typically uncoiled with a burst of strong volatility. The last case occurred just before the rally towards 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 keep in mind, however, is that the volatility emerging from the lows of Realized Volatility has historically gone in either direction, implying that the price movement emerging from this tight range could very well be a decline.
It remains to be seen how bitcoin price will develop going forward, given the historically stagnant action it has witnessed over the past week.
In other news, as Axel pointed out in another x x.com/AxelAdlerJr/status/1796403251350569174″ target=”_blank” rel=”nofollow”>mailThe recent move by the bankrupt exchange Mt. Gox has meant that many on-chain indicators have shown false signals.
The analyst has cited the graph of bitcoin's Adjusted Spent Output Profit Ratio (aSOPR) as an example.
The aSOPR tracks the net profits or losses that investors make across the network. As the Mt. Gox btc has been sitting still in wallets for quite some time, it is not surprising that its movement has “made” a lot of profits.
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Of course, this rise in the indicator is not actually a profit-taking signal, so it is not a signal that can affect the market.
btc Price
bitcoin has declined over the past day as its price has now dropped to $66,800.
Dall-E Featured Image, CryptoQuant.com, TradingView.com Chart
