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Bitcoin Historical Volatility Index

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Bitcoin Historical Volatility new low Here we have the BTC historical Volatility Index in blue. Orange is the price of BTC. The teal line is the 50sma for volatility. At the bottom, I have the correlation coefficient (CC) for the volatility index with BTC. I have marked in green when the CC reaches above 0.50, and red when it crosses below -0.50. The fibonacci retracement is fairly arbitrary, but fits nicely between 0.25 and 1.00. In this article, I would like to discuss a little bit about volatility. It is often associated as going up when price goes down, but is a bit more specific in what it is telling us than simply being an inverse price indicator. Next, I’ll talk about the correlation coefficient. It is an excellent tool that every trader, and investor, should learn to use. Finally, I would like to examine some of the similarities between our recent all time low in this index, breaking the low 2018, which proceeded the infamous 2018 capitulation event. Volatility is always an interesting indicator, and is often used to indicate position risk for the asset it is being calculated for. Simply stated, it is a measure of how much the price of an asset moves in a particular period of time. However, it can be calculated a number of different ways. The most common is standard deviation, or how far price is from an average of the price over a recent period of time. The amount of time the data is taken from can also change how the volatility measure acts and how useful it is. More so, because it measures movement, and not so much direction, it can be difficult to use it in an accurate way, as correlation appears to be inconstant at face value. Historical volatility is calculated a little differently. And honestly, before reading a few papers on it for this essay, I had not realized that ‘historical’ referenced the calculation method as opposed to it being the history of the volatility. Historical, or realized, volatility is an estimation of the standard deviation of the price of returns over a particular period of time, in this case, 24 hours. It can also be calculated with a weighting for the trading volume over the calculation period. I have placed a 50ma (150 day moving average) to show a general range for average volatility, and we can see that MA tends to oscillate between 2.5 and 5.0. The correlation coefficient is an excellent indicator that allows you to see, and quantify, the correlation of your current chart with any other chart ticker. Here I have it set to the BLX all time price index for BTC. The higher it goes, the more correlated the movement of the 2 charts are, and below zero indicates an inverse correlation. When CC is near zero, the movements of the two charts are NOT correlated. One of the issues with volatility indexes is their accuracy can vary, and is sometime disputed. My goal in using the correlation coefficient with this index is to parse out when volatility is most useful to pay attention to, and in which direction. On this chart, we can see that when volatility spikes above 10, it is often correlated with big, sudden moves to the downside. However, not all of them are. By using the correlation coefficient, we can parse out the direction of volatility. When CC is in the green, and volatility increases, we see the price of bitcoin moving up, usually in an explosive manner. Likewise, inverse correlation is often showing us downwards movements. I find this a useful way to pull a little bit of the noise out of the volatility index. The previous all time low in volatility of 0.35 occurred on October 28th of 2018, and about sixteen days before the 2018 capitulation event began. About a week ago on Christmas day, we broke that low, going down to 0.34. Very low volatility tells us that price isn’t just moving sideways, but is pretty flat for the most part. And if you have been following bitcoin lately (bless your soul) you know flat and boring is kind of an understatement. The good news is that it’s likely going to get exciting soon. Volatility doesn’t seem to stay at or below 1.0 for very long, and seems to be either correlated, or inversely correlated with price within a few weeks to a month after reaching 1.0. An exception would be from August of 2019 to the pandemic crash in 2020. We can see some similarities in both volatility and the correlation coefficient between the time leading up to the 2018 capitulation event and our recent data in 2022. Price action is also fairly similar (flat and boring) with the exception that in 2018, the line chart had a small move down and back up during the flatness, while we had a small move up and then down earlier in December. Although, I doubt this really means anything. In 2018, we saw a 50% drop after price had already fallen around 70%. From top to bottom, the draw-down was just under 85%. Another 50% draw-down from where we are at the time of writing would take the price of bitcoin to just over $8,000. So what does this mean? Well, I can tell you, for sure, 100%, that I can not tell the future. I will be, however, watching my new chart very closely. But I would say it is likely we’ll be seeing something exciting, and it will probably be in January. Unfortunately, it looks like CC moves down just as fast as price, and as fast as volatility moves up during sudden, capitulation like events. However, Bitcoin always has a way of surprising everyone. If CC moves down to 0, and then puts in another local high in the next week, I would be a little spooked. If it keeps moving up to 0.50, it may be an interesting and unexpected move to the upside. Regardless of what happens, I would encourage everyone to try to understand volatility a little better than you already do, and use the correlation coefficient indicator. It is a simple, yet versatile tool that can be used to quantify data in a way that makes a trading strategy precise. Here’s to 2023, I wish you well, and thanks for reading.
BITMEX:BVOL24HEducation
by MaliceM13
Waiting on BTC to make its moveWaiting on BINANCE:BTCUSDT to make its move. The end is in sight just waiting for it to get down there. Showing support around 13850, 6388, and 3334. Fib showing Golden zone around 7019 with potential to go as low as 4116. The 2018 cycle ended where BTC is currently sitting. The 2018-2019 downtrend was approx. -75% and we are currently at -73% is this it for BTC? Are we at the bottom? or do we go lower ::Shrugs Shoulders:: I'll be waiting to see how the support at 138XX holds up and see what it decides to do to make any moves, but I will be watching and waiting to make my move. ** Note: I do hold BTC and a handful of other cryptos. My thoughts and writings are my opinion and by no means is it to be considered financial advice. **
BITMEX:XBTShort
by Ikonickcrypto
1
🅱️ XBT Short-Term 1H | 29-Dec. | Happy 2023This is our short-term analysis updated... Targets are as follows: 1) $16,750 2) $17,055 3) $17,220 (higher high) 4) $17,690 (final target for this chart setup) The short-term charts are always changing... Fast. Invalidation happens short-term below the blue-line or a stronger stop below the 19-Dec. low. Any questions just leave a comment. ---- I shared a longer analysis in the 'Related Ideas' below. I am hoping that you enjoy the content. Your support is truly appreciated. You are appreciated. I hope you enjoyed the year 2022. I wish you the best in 2023 and beyond. I will be with you in 2023. We will be with you in 2023 and beyond. We connect through these words. We are blessed to have you. It is my pleasure to know that you are reading. I am so blessed to be here with you in this way... Remember, it doesn't matter how upside down the world turns... Whatever happens outside is a reflection of the inside. These are just moments for experience, for life, for growth... You can accept your mistakes, own them because they make you grow. And it doesn't matter whatever happens... You are a divine being... An eternal living being... You deserve the best now & always, forever... More and more. Namaste.
BITMEX:XBTLong
by AlanSantana
1
🅱️ XBT Short-Term 1H | 23-Dec.Consolidation continues to takes place. The chart remains the same so we will have a look at something different today. First the shakeouts. - We had one 19-Dec and another one yesterday, 22-Dec. - The second one smaller than the first and also a higher low. Now an interest data point. BitFinex price for bitcoin is higher than all other exchanges, I am seeing around 20-30$ usd higher. This isn't a considerable amount but surely a signal. BitFinex is one of the owners of crypto/Bitcoin, if they are bullish we have to take note. Their price being higher might signal what's to come. I don't know the exact reason why this is happening but we will take it as a bullish signal. If anybody knows the reason please enlighten us in the comments. 1H short-term, XBT trading above EMA50, EMA21 and EMA10. The RSI bullish. The longer this consolidation goes on above these levels and the bullish bias becomes stronger. In the higher timeframes we went with Bitcoin sideways but preparing for a rally in the weeks ahead. January - March 2023 we expect a bullish rally, now we wait and see it if happens. Namaste.
BITMEX:XBTLong
by AlanSantana
8
🅱️ XBT Short-Term 1H | 20-Dec. We just had a shakeout yesterday which can be taken as a bullish signal. A breakdown of support is obviously bad but seeing prices quickly recover after a drop is a sign of bullish strength. Bitcoin (XBT) remains within the same range as the 16-Dec. drop. Our main support levels will remain $16,580 and $16,100. We remain bullish above these levels short-term. Going below these levels and the bears can gain momentum. Patience is key. We will start looking at the Altcoins and see if some went ahead. Since the Altcoins are smaller than Bitcoin, they can give us signals by bouncing stronger/faster than bitcoin. Thanks again for reading and feel free to boost 🚀 if you enjoy the short-term updates and would like to see more. Namaste.
BITMEX:XBTLong
by AlanSantana
11
With no reason to move up, BTC is ready to hit $16.025 levelsWith no reason to move up, BTC is getting ready to go down to retest $ 16.025 levels. What is happening in the world right now putting more and more weight on Cryptocurrencies and BTC prices: job cuts Covid is spreading like rapid fire throughout China. Ukraine War which not coming to near end. Inflation and massive energy bills with nothing supporting cryptos, BTC is consolidating between $18000 levels and above 15300, with a higher potential for a drop further towards $16,025 levels, breaking there will lead to a quick visit to $15530.
BITMEX:XBTShort
by Raniawagdy
1
🅱️ XBT Short-Term 1H | 12-Dec.Bitcoin (XBT) continues trading within a range. All the technicals are the same as before, bullish. We've been having lower highs since 5-Dec. but also higher lows; again, consolidation. The signals are good but the politicians are likely to crash the market 13-14 Dec. as they usually do. Better to wait after they make their move to see how the market responds. Any bullish signals/bias can be quickly/easily negated as soon as they release their numbers and publish their decisions, that's how it normally goes. If the market does crash, we expect a fast recovery right afterwards. XBT's short-term support and resistance levels are clearly mapped on the chart. Namaste.
BITMEX:XBTShort
by AlanSantana
4
First high TF bullish pattern formation since May-July 2021What if the low is already in? A look back at the patterns we have since early 2021, it is the first time since China mining FUD in May 2021 we have a bullish pattern forming again. This is the weekly chart so this is more of a longer term idea...also, the bullish MACD cross on the weekly is still intact. But you pretty much cannot trade this in the crypto stocks, all mining stocks, crypto trust, MSTR are all completely uncorrelated to btc right now on the upside (more correlated to the equity indices), but perfectly correlated to the down side. So holding physical btc and hodling is the only option...
BITMEX:XBTLong
by timhku
10
LONG BITCOIN FUTURES TRADING WITH HIGH PRECISION AND CONSISTENCYLEVERAGE BTC Futures LONG ✅ Entry Point : USD 17440 Goal : USD 18000 Stall Brake : USD 17180 Leverage is extremely risky and must be executed with money that we are willing to lose or touch the stop loss Leave a comment that is helpful or encouraging. Together we can dominate the markets. Trading is the only trade in which the only one responsible for our actions is oneself, our worst enemy is oneself, here there is no one to blame, this is not a collective work, the only one who presses the sell button buy and knows how much to invest and where to stop losses is you, and only you, so always remember that. Important note: THE LEVEL OF LEVERAGE, the alert for taking early profits, the adjustment of the stop loss and the closing of forced operations are not made by this means. And also always remember to have control over your losses, focus on this and you will lose. Comment: WARNING!!!! I AM NOT A FUTURIST, I DO NOT MAKE PREDICTIONS. I AM A 100% MARKET OPERATOR, I WORK BASED ON MY EXPERIENCE, CONSISTENCY AND MY TRADING PLANNING.
BITMEX:XBTLong
by ANTICRIPTOVENGANZA
1