Bitcoin Reached Realized Volatility Highest Since COVID-19 Crash

According to data from analytics company Skew, Bitcoin’s realized volatility has reached levels as high as March 2020, the month in which Bitcoin crashed due to COVID-19. In the past month, the figure touched 103%, which means that in the past 30 days, the price of Bitcoin deviated from its average price by 103%. The reasons for the deviation are the sudden peaks and troughs of Bitcoin’s price. Bitcoin suffered its largest daily price drop on January 11, and in the weeks prior to the drop, the Bitcoin hit $41,000, which is its ATH.

Source：Twitter；Data from Skew

‘Realized volatility’ refers to the average fluctuation of a token’s price over a 30-day period. Skew measures volatility by working out the standard deviation in the price of the token over time.

Although the volatility figures are similar to those of last March, when Bitcoin crashed once the pandemic crashed everything, the main difference is we’re in a bull run. During bull runs, price fluctuations are more common as investors cash out at different points. According to Decrypt, Pedro Febrero, an analyst at Quantum Economics said: "The more volatility the price has, the greater the magnitude of the change in the prices of bitcoin. During bull runs, this is to be expected." 

Although Bitcoin’s volatility is great, it has outperformed other assets (such as gold) in the past year. Plus, as the price and market cap of the cryptocurrency has increased over time, overall the volatility of Bitcoin is going down.

Source: Twitter

And over the past year, Bitcoin and other cryptocurrencies are up and performing better than traditional investments. One anonymous investor tracked 10 cryptocurrencies over 2020 and found that they performed over 8 times better than the US stock market. His $1000 crypto investment grew 139%, while the S&P 500 was merely up 16%.

However, some analysts also think massive volatility is imminent. A popular crypto twitter named "yTedd" explained that “Bitcoin getting squeezed between the cloud. Specifically, between the 21 and 200ema – big move will follow.”

Source: Twitter; data from TradingView BTC/USD

Although he didn't indicate the direction, the coming few days should shine a light on whether this imminent move will favor bulls or bears.

By Sara Zhang

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