Searching For The Path Of Least Resistance In BTC Price? Look To Realized Volatility For Hints

March 31, 2021 03:00 PM
Crypto Story of the Day

Crypto Story of the Day




BTC continues to consolidate below USD 60,000 as realized volatility sees an ongoing breakdown. Spot volumes are less than 60% of the 30-day average.

Crypto Story of the Day

With BTC range-bound for the longest period in 2021, we’re receiving growing questions from investors around the direction of the path of least resistance for price. We look to realized volatility metrics for hints.

BTC has undergone the most lengthy consolidation since the rally to new highs, trading almost exclusively between 50,000 and 60,000 since March 3rd. Over the weekend, 14-day realized volatility, which had been tracing an uptrend throughout the rally that began in August, broke down. Anecdotal conversations with clients paints a picture of growing unease around the new calm. 

We would note that over the last 3 years, 14-day realized volatility has touched below 13 a handful of times and every time has led a rally. The 2 most striking instances occurred first between January and March 2019, where BTC made 52-week lows and saw a 3-month, low-volatility consolidation. That period ended a few months before the Facebook Libra announcement, which would see an ongoing rally extend to as high as roughly USD 14,000 before correcting. 

The second instance was during June and July this past summer (2020). After recovering from a highly-correlated snap selloff in March, volatility in BTC deviated from that of the broader macro landscape with 14-day realized volatility actually below that of the SPX at times. 

While the fundamental landscape continued to improve for BTC, investors scratched their heads until early August as little moved in the space. That, of course, came to an abrupt halt and BTC saw its greatest rally to date only 3 months after its lowest volatility period to date. Conversely, sell-offs have more often extended already-high volatility levels in reversing sharp price rallies.

Over the years, the “worst” that a low-volatility period has offered to BTC bulls is a tepid rally about a month after a consolidation. Current realized volatility levels remain closer to the midpoint than the low relative to the last 3 years. 

That said, should this period of quiet extend or volatility continue to break down, a relatively small historical sample size suggests it's more likely a positive than negative for price.

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About the Author

FRNT Financial is a technology and sales layer that offers institutional and accredited investors access to various forms of exposure to crypto-assets. You can subscribe to FRNT Financial Morning Note at