Analysis: halving is coming, Bitcoin may face greater volatility

Although few people attribute the sharp fluctuations in the price of bitcoin to a fixed supply of bitcoin, many people stress that such volatility is due to speculative demand from investors. However, since the beginning of 2020, the price of Bitcoin has recorded too many fluctuations. From breaking the $ 10,000 mark twice to below $ 9,000, Bitcoin has been performing quite "wildly" in the past two months. Inevitably, due to the unpredictable movement of prices, the currency's volatility is also rising and will continue.


Source: BTC / USD realized volatility, skew

As can be seen from the chart above (a month's realized volatility), the realized volatility of the bitcoin price follows a 55% rising pattern from January 27 and continues to rise until February 8 It dropped to 52%. After falling by 3%, it fell sharply on February 15th, with volatility falling by almost 10%. But since February 15th, Bitcoin has realized a continuous rise in volatility, from 42% on February 15th to 57% on February 27th-a rise of up to 15%.


Source: BTC ATM Implied Volatility, skew

On the other hand, data from the Skew market also shows that the implied volatility [IV] of Bitcoin is rising. This was a few weeks ago when IV fell from a 3.5% high ($ 10,000 pullback) to 3.2% for three consecutive months.

From the above pattern, it can be seen that from February 23 to February 27, the implied volatility of Bitcoin for one month rose by 7%. The implied volatility has not changed significantly since February 27, and prices have been fairly stable. However, from February 28, the implied volatility began to rise slowly.

Implied Volatility [IV] takes into account the supply and demand relationship that represents the expected fluctuations in the underlying stock or index over a specific time range. In short, IV is a forward-looking indicator that captures possible changes in prices. Investors often use it to price option contracts.


Source: BTCUSD / BITSTAMP, Tradingview

Comparing the two charts above (time range: February 18th to 28th), the price drop from February 18th to 19th is not large, so it can be seen on the implied volatility chart that the volatility does not change. Big.

However, the sharp drop in prices from February 24 to 26 indicates that volatility has risen significantly, as shown in the second chart. Because the current price of Bitcoin is hovering around $ 9,000, the volatility is not large, but the slow rising trend of volatility cannot be missed.

By analyzing the above data, it can be predicted that the price of Bitcoin will continue to fluctuate in the near future, and due to market performance, the third halving of Bitcoin is coming. Due to market performance, Bitcoin may experience greater volatility.