Bitcoin has seen a sharp decline in volatility entering 2023. The flagship cryptocurrency has been more stable than gold, the dollar index, the Nasdaq, and the S&P 500 over the past nine days. On the other hand, altcoins continue to make a scene amidst some frantic short squeezes and promising developments in the industry.
Bitcoin Volatility Hits Record Low
Amid a tranquil derivatives market and low trading activity, Bitcoin has remained stubbornly flat this year. According to a report by digital assets research and analysis company Arcane, Bitcoin’s 7-day volatility remains well below 2022 lows as the leading cryptocurrency reigns predominantly flat.
Similarly, BTC’s 30-day volatility remains at record lows, a level not seen since June 2020. Since the start of 2023, Bitcoin has been less volatile than gold, the DXY, NDQ, and the S&P 500. The period of BTC’s 5-day volatility simultaneously falling below all the aforementioned indexes is referred to as “relative volatility compression” in BTC by Arcane.
The research noted that such periods are highly unusual, and the current relative volatility compression event has already lasted for a record-long duration. The report said:
“Apart from the September 29 observation of last year, all other relative volatility compression events have been followed by volatile days with sharp bounces or frantic markets in the following 30 days.”
Furthermore, options implied volatility (IVs), traders’ estimation of volatility for the rest of the life of the options, have fallen towards all-time lows across a set of different expiries. More specifically, the IV of 1, 3, and 6-month expiries sit at all-time lows, the report said.
As of now, Bitcoin is trading at $17,442.35, up by 0.9% over the past day. The flagship cryptocurrency has increased by 4.5% over the past seven days. However, it has been mainly flat since early November after Bitcoin took some losses following the collapse of FTX.
Altcoins Rally Amid Short Squeezes and Promising Developments
While Bitcoin is experiencing record stability, some altcoins have seen a substantial uptick in price for different reasons. Heavily shorted altcoins and metaverse tokens have seen nice price rebounds tied to significant liquidations of short positions over the past couple of days.
For instance, Solana’s native token SOL gained around 15% on January 3 as a renewed interest in the token led to nearly $8.9 million in short liquidations materializing, which was the most significant short liquidation in more than a month.
Promising developments related to Ethereum’s Shanghai upgrade have also impacted the price movement of some altcoins, particularly the native tokens of liquid staking protocols. The Shanghai upgrade will include code allowing withdrawals of ETH staked in the Beacon Chain.
Lido Finance, Rocket Pool (NASDAQ:POOL), StakeWise, and Frax are some of the largest liquid staking platforms available on the market. These projects allow users to join ETH staking without running a validator node, thus making them an attractive alternative compared to staking the usual way.
The native tokens of these projects have surged as the Shanghai upgrade is expected to go live by March 2023. Lido’s LDO has gained more than 53% over the past week. Rocket Pool’s RPL and StakeWise’s SWISE are also up by 21.4% and 31.8% over the past seven days, respectively.
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This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.