What does it mean that Bitcoin's annualized realized volatility in August reached its highest level in more than a year?
In August, Bitcoin's volatility (the amplitude of price changes) reached its highest point in more than a year. You can think of volatility as the "heartbeat" of the market. If volatility is high, it means that the market is now quite nervous and the risk is high; if volatility is low, the market is relatively calm.
So, how do you calculate this volatility? Simply put, it is to look at the daily price changes of Bitcoin, and then calculate the average and standard deviation of these changes. The larger the standard deviation, the higher the volatility.
Since last year, Bitcoin's volatility has been like a rocket. In September 2023, weekly volatility was relatively low, but in November, it suddenly soared. (Figure 1 below) This is exactly when the price of Bitcoin rose from more than $20,000 to $60,000. However, when the price of Bitcoin stabilized, volatility also slowly dropped in early 2024.
If you look at Bitcoin’s historical data since 2015, you’ll see that this volatility is a key node for Bitcoin’s price trend reversal. It also shows how sensitive the market is to macroeconomic factors and dynamics within the cryptocurrency industry.
As Bitcoin matures, these volatility patterns may give us some clues about the market’s sentiment and may provide insights into the potential for Bitcoin’s future price movements.
So, what do you think of Bitcoin’s recent volatility? Do you think this increased volatility will continue the previous trend and usher in a crazy surge in Bitcoin prices? Leave your thoughts in the comments!
