Fidelity Digital Assets, a cryptocurrency-focused subsidiary of Boston-based financial behemoth Fidelity, has noted that Bitcoin's volatility has plunged to the lowest level ever.
"Realized volatility" measures how much an asset's price fluctuates over a specific period (which is one year in this specific case).
A score of 42% is incredibly low for Bitcoin. The bellwether coin has historically seen annual volatility surpassing 100% or even 200% in its early years.
In plain words, Bitcoin is currently "boring."
However, it is worth noting that volatility tends to be cyclical. Hence, eye-popping volatile swings might not necessarily be just a thing of the past. A drop to 42% shows that there is extreme compression, and another extremely volatile move could be in the offing. Bitcoin also had some extremely boring streaks of trading activity during previous cycles as well. Hence, this uncharacteristic calm might be deceiving.
A bullish sign?
According to Fidelity Digital Assets, Bitcoin’s extremely low volatility might actually precede a much-anticipated rally.
The chart that accompanies the financial giant’s most recent social media post shows that that all-time low volatility typically acts as a precursor to all-time high prices.
For instance, the low volatility of 2016 preceded the 2017 bull run to $20,000.
The chart shows a fresh cluster of red bars appearing right now.
The current period of stability could a sign of accumulation that could eventually propel BTC to new highs.
However, history might not necessarily repeat itself this time around, given that different market forces are now in play with the launch of cryptocurrency ETFs.
Bitcoin is currently trading at $90,789, struggling to recover from a recent drop. The cryptocurrency recently failed to surpass the $95,000 level.
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