Bitcoin Price Volatility Drops to its Lowest Level of the Year

The price of Bitcoin is currently as stable as it has been for a long time. The price fluctuates between $9,000 and $ 9,600 without strong breakouts, and the volatility index drops to one of the lowest values ​​in years. But what does that mean?

At the beginning of May, boredom broke out in the Bitcoin course. The price has recovered from the sharp Corona drop and has climbed back above the $ 9,000 mark. Since then, the price has been approaching the $ 10,000 threshold and falling below the $ 9,000 mark – without breaking it sustainably. Most of the time, the price stays somewhere between $ 9,000 and $ 9,500.

Bitcoin volatility indices

Several volatility indices are trying to grasp this trend. The derivatives exchange BitMex, for example, calculates its volatility index from the standard deviation of minute snapshots, buybitcoinworldwide.com uses the price change of a 30-day window as the basis, while 99Bitcoins.com makes one-day deviations the basis of the index. Of course, the different methods of calculating the index lead to different results.

Bitmex’s hourly scaled volatility index shows that the volatility of the Bitcoin price has been falling significantly since March. It is currently around 1.7. This is a historically relatively low value, as illustrated by the aggregation of the data on a weekly scale:

The curve looks relatively flat. But you have to keep in mind that with such a calculated index, even small deviations can have a major impact on the markets. The current volatility index for the Bitcoin price tends to be lower than any value in 2020 but will be briefly reached in autumn 2019. In spring 2019 and autumn 2018 it will fall significantly short; To find other comparable phases, you have to go back to 2016.

A similar picture emerges from the Buybitcoins.com volatility index: The current 30-day volatility of 1.89 percent is also lower than any other value in 2020 and will only be reached even in 2019. Longer phases of significantly lower volatility can only be found in 2016 and earlier.

The situation at 99 bitcoins looks different. According to the volatility index on this page, the volatility in early 2020 was still a bit lower than today, while it fell significantly lower in spring 2019 and was much lower before 2017 over very long periods.

So we have different indices with different values, but all of them tend to say the same thing: The volatility of the price of Bitcoin is currently at a very low value, which is not unique, but is at least a low over the course of the year – or at least this very low comes close.

Does the volatility say anything about the future course of the price?

This is of course boring for traders. If the course doesn’t dance, there will be less profits to be won. This can be seen in the trading volume of all exchanges. According to data from Coinmarketcap, the trading volume for Bitcoin has dropped to the lowest level in 2020 so far:

However, the volume was similarly low in autumn 2019, and if you go back a little further, you will find significantly lower values ​​for almost the entire year 2018.

Is there a connection between volatility and future price developments? The Bitmex index also shows very low values ​​for early November 2018 and late March 2019. A violent collapse followed in November, marking the lowest point since the bubble in late 2017; In late March 2019, on the other hand, an upswing began that catapulted the Bitcoin price from this valley to over $ 10,000.

We also find these two points on the BuyBitcoins charts; if we look back further we find extreme lows in April and October 2016. At both times the price remained relatively stable afterward, albeit slightly increasing. October 2016 could, however, be used as a stirrup holder for the rally, which only really took off in 2017. The 99Bitcoins index has nothing to add to these timestamps.

If we want to speculate something from this data, it would be that falling volatility in the Bitcoin price has always been replaced by rising volatility – and that this has intensified an existing trend. For example, the course was already slightly downhill in November 2018, while it already demonstrated a gentle upward swing in March 2019; Similarly, the phases of low volatility in 2016 resulted in an increase in the already visible upward trend. This could mean bad prospects for the coming weeks.

On the other hand, one could assume that falling volatility makes Bitcoin more usable. When the price fluctuates 2-10 percent a day, the native acceptance of Bitcoin for merchants is often a game of chance. Conversely, if it fluctuates less than 1 percent, the risk levels out to a level that is no longer significantly different from other factors, such as fraud, chargebacks, the loss of a package at the post office, or credit card fees. It makes both the acceptance of Bitcoins and the operation of a Bitcoin payment service provider much more predictable.

However, whether this actually goes hand in hand with an increase in Bitcoin transactions in trade is just as uncertain as in which direction the Bitcoin price will swing at the end of the sideways movement.