Bitcoin Sees Lower Volatility but More Frequent Extreme Moves Than in 2018

Bitcoin has seen more frequent extreme price movements in 2026 than during the 2018 bear market, despite its overall volatility falling sharply. CoinDesk’s analysis found 10 unusually large trading days this year, raising questions about whether traditional risk models can adequately measure Bitcoin’s exposure to sudden losses as institutional participation grows.

The analysis identified 10 days in 2026 when Bitcoin’s price moved at least three standard deviations away from its recent trading pattern. That is more than the eight such days recorded throughout 2018, when the cryptocurrency lost 73% of its value.

These events are measured using “sigma,” a statistical indicator of how far an asset’s price movement deviates from its usual behavior. CoinDesk compared Bitcoin’s daily price changes with its 30-day realized volatility, which tracks the magnitude of price fluctuations over the previous month. Any daily move at least three times that volatility level, in either direction, was classified as a three-sigma event.

In a normal bell-shaped distribution, about 95% of movements fall within two standard deviations, while approximately 99.7% fall within three. This makes three-sigma movements relatively rare and useful for identifying significant market shocks. When such events occur frequently, they indicate that an asset remains vulnerable to sudden price changes even if its overall volatility is declining.

The results suggest Bitcoin’s average price fluctuations have become smaller over time, but its sharpest moves remain a persistent feature of the market. Although these events have occurred more frequently in 2026 than in 2018, their average size has decreased.

Bitcoin’s annualized volatility is approximately 46% this year, compared with 84% in 2018. Meanwhile, its average three-sigma movements have declined to around 7%, down from approximately 10% eight years ago.

Nicolas Quatravaux, head of EMEA at Paradigm, an institutional liquidity network for crypto derivatives, said Bitcoin continues to alternate between long periods of relatively stable trading and abrupt price adjustments. He attributed the calmer average trading environment to increased institutional participation, exchange-traded funds and deeper liquidity. However, macroeconomic developments, leverage and market positioning continue to trigger sudden shocks.

Bitcoin’s behavior also differs from that of other major assets. Since 2024, its volatility has been broadly comparable to Nvidia’s, at roughly 47%. Despite that similarity, Bitcoin has recorded 26 three-sigma events over the period, compared with eight for Nvidia. The S&P 500 has experienced 16, while gold has recorded 12.

Falling volatility presents a risk-model challenge

The persistence of extreme price movements complicates investment decisions for traders using volatility-based models to determine their Bitcoin exposure.

One widely used measure is value-at-risk (VaR), which estimates how much a portfolio could lose over a specified period. Some VaR models rely heavily on recent market behavior, so an extended period of relatively calm trading can make an asset appear less risky than it really is.

As Bitcoin’s 30-day, 90-day and 180-day volatility measures decline, these models may encourage investors to increase their holdings. However, depending on their design, the models might not fully account for the possibility of unusually large losses.

VaR also estimates a potential loss threshold without explaining how severe losses could become once that level is breached. This is known as tail risk, the possibility of rare but exceptionally large losses outside an asset’s normal trading range. Bitcoin’s recurring three-sigma events demonstrate why investors must consider these extreme scenarios even as routine price fluctuations decline.

Luuk Strijers, CEO of crypto options exchange Deribit, said traditional VaR measures do not adequately capture the full extent of tail risk. He noted that the industry has increasingly turned to Expected Shortfall and similar methods to address this weakness.

Expected shortfall estimates the average loss across the worst market outcomes, helping investors understand the potential severity of extreme losses rather than simply identifying a threshold.

Macro events and options trading fuel sharp moves

Market participants point to unpredictable macroeconomic shocks and heavily leveraged options positioning as major factors behind Bitcoin’s recurring extreme price movements.

Quatravaux said developments throughout 2026 demonstrate how these forces can combine. The year started slowly as investors moved capital into technology stocks, while a series of decentralized finance hacks encouraged traders to sell volatility and seek income through structured products.

Subsequent developments involving U.S. President Donald Trump, the Iran war and Federal Reserve policy introduced further uncertainty. With many traders positioned for prices to remain within a narrow range, a single headline could trigger an unusually large move, he said.

Risk can build when traders expect markets to remain calm. Selling options allows them to collect premiums while taking on exposure to potential price swings. Such strategies can generate returns during stable periods, but unexpected news may force sellers to close positions or reduce their exposure quickly, amplifying market movements.

Alexander S. Blume, co-founder and CEO of Two Prime, an SEC-registered investment adviser, highlighted call overwriting as another popular strategy. Investors sell call options against Bitcoin they already own, collecting premiums in exchange for limiting some of their potential upside.

Blume said the growth of derivatives positioning has helped keep large price movements relatively frequent despite lower overall volatility. He described call overwriting as a crowded trade and warned that sharp upward moves can trigger short squeezes, further accelerating price gains.

A stronger market still faces sudden shocks

Bitcoin’s market infrastructure appears better equipped to absorb volatility than it was several years ago.

On Sept. 21, when Bitcoin experienced its latest three-sigma jump, Paradigm facilitated a record $6.7 billion in options trading.

Quatravaux said there had been no reports of trading desks suffering significant losses during the episode. He credited more sophisticated market participants, improved risk management and greater institutional involvement with helping the market withstand the shock.

These developments indicate that the market may now be better able to manage turbulent periods without allowing every difficult month to develop into a wider crisis.

However, investors should not expect extreme movements to disappear. Quatravaux said a decade of data shows that unusually large trading days have persisted despite Bitcoin’s market maturation. With macroeconomic shocks unlikely to vanish, sudden price adjustments will probably remain a feature of Bitcoin trading even if its overall volatility continues to fall.