• The crypto market has been holding steady, with bitcoin ranging between $16,000 and $18,000, with low volatility levels.
• Bitcoin’s one-month realized volatility has dropped to a two-year low of 38%, with investors expecting a sharp move soon.
• An uptick in implied volatility combined with a period of low realized volatility could lead to wild price fluctuations.

The crypto market has recently been experiencing a period of relative stability, with bitcoin locked in the narrow range of $16,000 to $18,000. This steady performance has been accompanied by low levels of volatility, with bitcoin’s annualized one-month realized volatility dropping to a two-year low of 38%. This lack of volatility has been attributed to lingering macroeconomic uncertainty and the recent FTX contagion fears.

Realized volatility refers to the magnitude of daily price movements, irrespective of direction, over a specific period. It’s a backward-looking metric, while the implied volatility is forward-looking, revealing options traders’ expectations for price turbulence over the coming week/month. The fact that the one-month realized volatility is at its lowest since 2020 suggests that the market is currently in a state of calm.

However, investors are expecting this period of tranquility to be short-lived. The Dec. 12 issue of Bitfinex’s Alpha report warned that the low realized volatility could soon be followed by wild price fluctuations. This is because an uptick in implied volatility with an extended period of low realized volatility is often followed by rapid price movements.

Blockware’s weekly report echoed similar sentiments, noting that “calm waters do not last long in bitcoin, so be prepared for a sharp move here shortly.” The report also highlighted the fact that this is the lowest level of realized volatility since the third quarter of 2020, just before the last bull run. Therefore, investors with ample capital supply may begin to accumulate coins, which could lead to an increase in market activity.

Overall, the crypto market is currently in a state of relative stability, with low volatility levels. Although this tranquil period may soon come to an end, investors should be prepared for a swift move in the near future.


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