Market Alert: Bitcoin Volatility Expected to Mirror Summer 2023 Levels

Bitcoin Implied Volatility Near Multi-Year Lows, Signaling Potential October Breakout

Bitcoin (BTC) implied volatility has compressed to multi-year lows, echoing a pattern seen in summer 2023 that preceded a sharp October price surge.

The cryptocurrency has recently traded in a tight range between $110,000 and $120,000, keeping near-term volatility expectations subdued. Volmex Finance’s BVIV index, which tracks 30-day implied volatility, has dropped to an annualized 38%, down from a brief August spike of 41%, and is approaching the two-year low of 36% seen just four weeks ago.

Implied volatility, derived from option pricing, measures market expectations for future price movement over the course of a year. Tracking at-the-money IV provides a normalized gauge of market sentiment, which generally moves in line with realized volatility.

This current volatility compression mirrors the summer 2023 setup, when IV fell from around 50% to 35% and remained low until October. At that time, bitcoin rose from a bottom near $25,000 to about $46,000 by year-end, coinciding with the run-up to the launch of spot Bitcoin ETFs in early 2024.

The pattern reflects IV’s mean-reverting nature: periods of calm are often followed by significant price swings. The present compression suggests the market may be underestimating upcoming turbulence. Historically, October has been a critical turning point for bitcoin, with the fourth quarter delivering average gains of roughly 85%.