Since the end of November last year, Bitcoin (BTC) has been fluctuating within a narrow range of $91,000 to $109,000, with volatility significantly contracting to its lowest levels in years, which may indicate that the market is on the verge of a sharp fluctuation.
According to data from blockchain data analysis firm Glassnode, Bitcoin’s two-week realized volatility has dropped to an annualized 32%, one of the lowest levels in years, indicating the extent of price movement over the past two weeks. In addition, the one-month implied volatility of options (i.e., the market’s expectation of volatility over the next four weeks) has fallen below an annualized 50%, also marking one of the lowest levels in years.
Source: Glassnode
To illustrate the degree of Bitcoin’s consolidation during this period, one can refer to the “Choppiness Index” on the on-chain data analysis platform Checkonchain. The data shows that Bitcoin’s weekly Choppiness Index has reached its highest level since 2015, indicating that the market has entered an extreme consolidation phase.
Source: Checkonchain
Volatility typically exhibits mean-reverting characteristics, meaning that when the market is abnormally stable, it often signals an impending sharp fluctuation in either direction, and vice versa. The longer the consolidation period and the narrower the range, the more intense the eventual volatility explosion is likely to be.