The Bitcoin market has become extremely boring for traders over the past few weeks. Volatility has fallen to historically low levels, but this could mean that a major move is imminent in the near future.
As stated by analyst Charles Edwards of Capriole Investments, a major move is brewing for the Bitcoin price that will be shaping for the months to follow. Edwards shared the chart below on Twitter and warned:
Bitcoin is currently trading at a major low in volatility. Generally, when Bitcoin breaks out of extremely low volatility, the ensuing trend tends to last. Don’t fight the trend on the next major move.
Bitcoin History Suggests Major Move
The Bitcoin Volatility Index from BitMEX (BVOL7D) – a moving average for the last seven days – paints a very similar picture. A look at the recent history of the Bitcoin price shows that especially from the bull market tops down to the bottom, volatility has gradually decreased.
In this context, the level of 4.47 of the BVOL7D was consistently a key level. This can also be seen in the crash of November 2018 when the BTC price fell to as low as $3,200. Before the major price movement happened, volatility fell below the crucial figure.
In the case of 2017’s bull run and 2018’s bear market, the volatility index was able to signal the last move down and the first leg up. In mid-2019, volatility also started to gradually decline again, near 4.47. After that, there was an upward movement, but it was stopped early by the COVID crash.
Prior to the start of the bull run in 2021, there were again two events where volatility fell below the decisive level. Only after this did the rally start and the all-time high of $69,000 was reached. Since the peak, volatility has been gradually moving down again.
Currently, BVOL7D is near its all-time low of 1.76 (October 2018) with a value of 2.19. The last bull run was kickstarted when BVOL7D hit the third-lowest value ever, at 3.19. In the same week, BTC broke through key resistance at around $12,500 and kicked off 12 extremely bullish weeks for the price, during which BTC rose above $42,000 and posted a green weekly candle in 10 out of 12 weeks.
A similar picture emerges for the implied volatility in the next 30 days on the options market for Bitcoin. The one-month implied volatility for BTC is at its lowest level in the young history of the data (since 2021). The six-month implied volatility is also at its lowest level since records began.
Overall, this means that Bitcoin is more vulnerable to shocks, as relatively large orders can have a greater impact on the market price. At press time, BTC traded at $16,821.