Bitcoin has seen a sharp drop in volatility entering 2023. The flagship cryptocurrency was more stable than gold, the dollar strength index, the Nasdaq and the S&P 500 over the past nine days. On the other hand, altcoins continue to make the scene amid some crazy short squeezes and promising developments in the industry.
Bitcoin’s volatility has reached record highs
Amid a quiet derivatives market and low trading activity, Bitcoin has remained stubbornly stable this year. Bitcoin’s 7-day volatility remains well below its 2022 lows as the leading cryptocurrency remains largely flat, according to a report by digital asset research and analysis firm Arcane.
Similarly, BTC’s 30-day volatility remains at a record high, a level not seen since June 2020. Since early 2023, Bitcoin has been less volatile than gold, DXY, NDQ, and the S&P 500. BTC’s 5th cycle Intraday volatility falling below all the above-mentioned indices at the same time is called “relative volatility compression” in BTC by Arcane.
Such periods are highly unusual, the study noted, and the current relative volatility compression event has already lasted a record long time. The report states:
“Except for last year’s September 29 observation, all other relative volatility compression events have been followed by volatile days with sharp spikes or wild markets over the next 30 days.”
In addition, implied volatility options (IVs), traders’ assessment of volatility for the option’s remaining term, have fallen to all-time lows across a diverse set of timeframes. More specifically, 1-, 3-, and 6-month IV durations hit all-time lows in the report.
Bitcoin is currently trading at $17,442.35, up 0.9% over the past day. The flagship cryptocurrency has gained 4.5% in the past seven days. However, Bitcoin has been mostly flat since early November after suffering some losses following the FTX collapse.
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Altcoins rally amid short squeezes and promising developments
While Bitcoin has experienced record stability, some altcoins have seen significant price increases for various reasons. The heavily shorted altcoins and metaverse tokens have seen nice price rebounds over the past few days, coupled with significant liquidation of short positions.
For example, Solana’s native token SOL gained nearly 15% on January 3 as renewed interest in the token led to nearly $8.9 million in short liquidations, the most significant short liquidation in more than a month.
Promising developments related to Ethereum’s Shanghai upgrade also affected the price action of some altcoins, especially the native tokens of liquid staking protocols. The Shanghai upgrade will include code that allows mining of distributed ETH on the Beacon Chain.
Lido Finance, Rocket Pool, StakeWise and Frax are some of the largest liquid staking platforms available in the market. These projects allow users to join the ETH sting without running a validator node, thus making them an attractive alternative to the conventional method.
As the Shanghai upgrade is expected to become operational by March 2023, the local tokens of these projects have increased. Lido’s LDO has gained over 53% over the past week. Rocket Pool’s RPL and StakeWise’s SWISE are also up 21.4% and 31.8% respectively in the last seven days.
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About the author
Ruholamin Haqshanas is an experienced cryptocurrency and finance journalist with over two years of experience in the field. He is well versed in various segments of the FinTech space, including the decentralized iteration of financial systems (DeFi) and the emerging market for non-trivable tokens (NFTs). He is an active user of digital assets for money transfers.