Bitcoin volatility dips to yearly lows as FOMC meeting looms

Bitcoin ended its fourth week of narrow trading Sunday, sending volatility readings to levels not seen since the year began.

The 30-day estimate for the world’s largest digital asset has fallen to just 0.74%, bitcoin’s (BTC) lowest realized reading since Jan. 16 (71%), data from 99Bitcoins shows.

Bitcoin’s volatility details the measurement of how much its price shifts in a single day. The investment is riskier if the reading is significant, leading to harder-to-predict price swings.

T3I’s BitVol Index, used to judge 30-day implied volatility for bitcoin options contracts, has also dipped to its lowest implied reading since its inception more than four years ago, data shows. 

CVI’s Crypto Volatility Index, designed to mimic similar functionality to that of the S&P 500’s VIX, has also dipped to its lowest recorded levels. The index takes into account both bitcoin and ether’s (ETH) implied volatility over a 30-day period.

Implied volatility is the market’s prediction of how much an asset’s price will change in the future, while realized volatility is a measure of how much the asset’s price has actually changed in the past.

Daily moves between 5%-10% are not uncommon in crypto, though trading has remained relatively muted in recent months. Periods of excess market exuberance, beget higher levels of volatility for digital assets.

But bitcoin, like ether, has been range bound since the end of last month after a more than 15% pop in its price followed Blackrock’s spot BTC ETF filing on June 15. This month’s trading range for the asset has narrowed to between $31,800 and $29,500.

Low volatility readings point to disinterested crypto markets patiently eyeing upcoming developments in traditional markets as July’s temporary speculation for digital assets fizzles.

The Federal Reserve is tipped to raise interest rates by a further 25 basis points as part one of its final two predicted rate hikes this year, according to CME FedWatch data. The Federal Open Market Committee, the Fed’s primary body for monetary policy, is expected to meet on Tuesday.

An increase in interest rates by the Federal Reserve typically results in greater borrowing expenses, which could diminish the appeal of investments in more volatile assets. Conversely,  falling interest rates could fuel further speculative activity, as was the case in the past decade.

The anticipated hike could come despite a rapidly decreasing rate of inflation, evidenced by the reduction of consumer prices from the latest CPI figures.

Airline tickets are down 18.9%, used cars 5.2% and tech goods 7.7%, with computers and smartphones dropping 5.2% and 16.1% respectively. However, food and housing costs, up 5.7% and 7.8%, are keeping inflation sticky, Ira Kalish, Deloitte’s chief global economist wrote in the Wall Street Journal last week.

“One of the fears of the Fed is that the tight labor market could drive significant wage gains, thereby making it difficult to suppress inflation,” he said. “So far, this has not been the case.”

---

Get the news in your inbox. Explore Blockworks newsletters:

• Blockworks Daily: Unpacking crypto and the markets.
• Empire: Crypto news and analysis to start your day.
• Forward Guidance: The intersection of crypto, macro and policy.
• 0xResearch: Alpha directly in your inbox.
• Lightspeed: All things Solana.
• The Drop: Apps, games, memes and more.
• Supply Shock: Bitcoin, bitcoin, bitcoin.