Since the end of November last year, Bitcoin (BTC) has been oscillating narrowly between $91,000 and $109,000, with volatility significantly contracting to its lowest levels in years, which may indicate that the market is about to experience intense fluctuations.
According to data from blockchain analytics firm Glassnode, Bitcoin’s two-week realized volatility, which reflects the asset’s price movements over the past two weeks, has dropped to an annualized 32%, marking one of the lowest levels in years. Additionally, the one-month implied volatility of options, which represents the market’s expectations for price movement over the next four weeks, has fallen below an annualized 50%, also one of the lowest levels in years.
Source: Glassnode
To illustrate the extent of Bitcoin’s consolidation during this period, we can refer to the “Choppiness Index” available on the on-chain data analysis platform Checkonchain. The data shows that the Choppiness Index for Bitcoin at the weekly level has reached its highest point since 2015, indicating that the market has entered an extreme consolidation phase.
Source: Checkonchain
Volatility typically exhibits mean-reversion characteristics, meaning that when the market is unusually stable, it often signals an impending significant movement in either direction, and vice versa. The longer the consolidation period and the narrower the range, the more intense the eventual volatility explosion will be.
