Bitcoin saw a sharp drop in volatility in 2023. The flagship cryptocurrency has outperformed gold, the dollar strength index, the Nasdaq and the S&P 500 over the past nine days. Meanwhile, altcoins continue to make the scene amid desperate short squeezes and promising developments in the industry.
Bitcoin Volatility Hits Record Low
Bitcoin has remained stubbornly flat this year amid calm derivatives markets and low trading activity. Bitcoin’s seven-day volatility remains well below his 2022 lows, according to a report from digital asset research and analytics firm Arcane, with the major cryptocurrency largely flat. .
Similarly, BTC’s 30-day volatility remains at record lows not seen since June 2020. The day’s volatility below all the aforementioned indicators simultaneously is called Arcane’s ‘relative volatility compression’ of his BTC.
Research shows that such periods are extremely rare, and the current relative volatility compression event has already lasted for record length. The report states:
“Aside from last year’s September 29 observation, every other relative volatility compression event was followed by a volatile day with either a sharp rebound or a mad market over the next 30 days.”
Additionally, the implied volatility (IV) of an option (a trader’s estimate of the remaining term volatility of an option) has fallen toward an all-time low over a series of different maturities. More specifically, 1-, 3-, and 6-month expiration IVs are at an all-time low, the report says.
Bitcoin is currently trading at $17,442.35, up 0.9% over the past day. Major cryptocurrencies have gained 4.5% over the past seven days. However, it has largely been flat since early November after Bitcoin suffered some losses following the collapse of FTX.
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Altcoins Rise Amid Short Squeeze and Promising Developments
Bitcoin has recorded record stability, but some altcoins have seen significant increases in price for a variety of reasons. Heavily shorted altcoins and metaverse tokens have seen a nice price rebound in the past few days in connection with the significant liquidation of short positions.
For example, Solana’s native token SOL rose by about 15% on January 3rd. New interest in the token has resulted in a short liquidation of approximately $8.9 million. This was the most significant short liquidation in over a month.
Promising developments related to Ethereum’s Shanghai upgrade have also impacted the price volatility of some altcoins, especially the native tokens of liquid staking protocols. The Shanghai upgrade will include a code that will allow withdrawal of ETH staked on the beacon chain.
Lido Finance, Rocket Pool, StakeWise, and Frax are some of the largest liquid staking platforms available on the market. These projects allow a user to participate in her ETH staking without running a validator node, making it a more attractive option than staking the usual way.
Native tokens for these projects have skyrocketed as the Shanghai upgrade is set to begin by March 2023. Lido’s LDO for him has risen by more than 53% over the past week. Rocket Pool’s RPL and StakeWise’s SWISE are also up 21.4% and 31.8% respectively over the past seven days.
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About the author
Ruholamin Haqshanas is a seasoned cryptocurrency and financial journalist with over two years of writing experience in the field. He has a firm grasp on different segments of the FinTech space, including decentralized iterations of the financial system (DeFi) and emerging markets for non-fungible tokens (NFTs). He is an active user of digital assets for money transfers.
