Data shows the Bitcoin 7-day volatility has come alive during the last week as the collapse of crypto exchange FTX has shaken up the market.
Bitcoin 7-Day Volatility Has Spiked To Values Above 7%
According to the latest weekly report from Arcane Research, the current 7-day volatility levels are the second highest seen in this year.
The “volatility” is an indicator that keeps track of the average daily returns in the price of Bitcoin over a specific period of time.
While this timespan can be of any length, the “7-day” and “30-day” versions of the metric are the most natural.
A notable feature of the volatility indicator is that it only measures returns using the closing prices on each day. This implies that any intraday market movements aren’t accounted for by the metric, so as long as the price returns to the norm by the end of the day.
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When the volatility has a high value, it means the price of the crypto has fluctuated a lot recently. On the other hand, low values suggest the BTC market has been displaying stale activity.
Now, here is a chart that shows the trend in the Bitcoin 7-day and 30-day volatilities over the past year:
Looks like the values of the metrics have spiked up in recent days | Source: Arcane Research's Ahead of the Curve - November 15
As you can see in the above graph, both the 7-day and 30-day versions of the Bitcoin volatility have observed a sharp increase recently.
Before this rise, the indicator had very low values for a month or so, with the 7-day version especially reaching historical lows of 1%.
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The collapse of FTX and the resulting market crash is behind the crypto’s sudden turn to volatile nature during the last week.
The 7-day volatility has surged above the 7% mark, reaching levels only behind the yearly high of June, when 3AC went bankrupt.
Historically, Bitcoin has become calmer following big spikes in the volatility like the one being observed right now.
However, the report notes that the current market environment is filled with contagion-related uncertainty and abnormal positioning in derivatives, so the market will likely continue to be volatile in the coming days.
At the time of writing, Bitcoin’s price floats around $16.7k, down 5% in the last week. Over the past month, the crypto has lost 12% in value.
The below chart shows the trend in BTC’s price over the last five days.
The value of the crypto seems to still be consolidating around $16.7k | Source: BTCUSD on TradingView News Source