Bitcoin Volatility Sinks To Multi-Year Lows As Chaotic 2022 Approaches Quiet End


Data shows the Bitcoin realized volatility has plunged to multi-year lows this month, implying that the chaotic 2022 might be looking to end on a more quiet note.

Bitcoin Short-Term Realized Volatility Is Now Lowest Since October 2020

As per the latest weekly report from Glassnode, BTC has been rather silent in this month of December, compared to what was a very chaotic rest of the year. The relevant indicator here is the “annualized realized volatility,” which measures the standard deviation of daily returns from the mean for the Bitcoin market.

When the value of this metric is high, it means the price of the crypto has been showing large daily fluctuations recently. Such values imply the crypto currently involves high trading risk. On the other hand, low volatility values suggest the BTC market has displayed a rather stale price movement recently, with day-to-day returns being quite low.

The indicator can be taken over a rolling window based on any length of time, but in the context of the current topic, the most useful versions of the metric are the 1-week, the 2-week, and the monthly versions. Now, here is a chart that shows how the 7-day moving average annualized realized volatility of Bitcoin has changed for these short-term windows over the last few years:

Bitcoin Realized Volatility

The 7-day MA values of these metrics seem to have gone down in recent days | Source: Glassnode's The Week Onchain - Week 50, 2022

As you can see in the above graph, the Bitcoin annualized realized volatility over these timespans has been at decently high levels during most of 2022. The year has been marked by several highly volatile events like the Terra USD (UST) collapse, the 3AC bankruptcy and the subsequent domino effect on other lenders, and the latest FTX debacle that has also brought fresh contagion with it.

In this final month of December, however, the short-term volatility seems to have taken a plunge to cycle lows as the asset’s price has mostly been trading sideways. Now, the 1-week annualized realized volatility is just 22%, while the 2-week version is down to only 28%. The last time Bitcoin observed such low values in these metrics was back in October 2020, before this cycle’s bull run began.

Bitcoin Price Chart

Looks like the value of the crypto has seen a sharp surge during the past 24 hours | Source: BTCUSD on TradingView

At the time of writing, Bitcoin’s price floats around $17.4k, up 2% in the last week. Over the past month, the asset’s investors have accumulated 3% in profits. The above chart displays the trend in the price of the coin over the last five days.

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