Bitcoin's volatility dipped to its lowest level since 2023 in the month of July.
Bitcoin Volatility Hits Record Low in July 2023
The world's most prominent digital currency, Bitcoin, experienced a significant drop in volatility during July 2023, reaching its lowest point since late 2023. This development was primarily due to reduced demand for hedging in options markets, market maturation, and structural factors such as supply constraints and the 2024 halving event.
According to data compiled by investment manager Blockforce Capital, Bitcoin's annualized 30-day volatility fell to 25.26% on July 23, and the annualized 60-day volatility dropped to 28.53% on July 30. This is the lowest value for Bitcoin's 30- and 60-day volatility since October 15, 2023, and August 28, 2023, respectively.
One of the key factors contributing to this reduced volatility was diminished hedging activity among options traders. This indicates less fear or uncertainty about sudden price changes. Market maturity also played a role, with institutional investors increasing participation, which tends to stabilize price movements and reduce extreme volatility.
The contribution of U.S. regulatory progress to this trend cannot be overlooked. Regulatory clarity and progress, including the anticipated approval of Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC), helped improve market confidence. News and speculation about ETF approvals, alongside legislative actions such as the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), created structural optimism and fostered demand for Bitcoin and related products, which smoothed out extreme price fluctuations.
Although regulatory crackdowns had occurred earlier in 2023, the easing or clearer guidance from U.S. regulators encouraged institutional participation, directly supporting price stability. The U.S. House of Representatives passed three separate bills providing cryptocurrency regulations during July, further contributing to the regulatory backdrop becoming a bit more clear.
During this volatile-friendly month, Bitcoin's price fluctuated significantly, trading between less than $105,000 and more than $122,750, according to figures provided by Coinbase from TradingView. The chart below helps illustrate these developments in Bitcoin's volatility and price during July.
In summary, Bitcoin's volatility reached its lowest point since late 2023 due to reduced hedging demand, market maturation, supply dynamics, and positive regulatory developments in the U.S. These factors collectively softened price swings and fostered a more stable trading environment by mid-2023.
[1] Blockforce Capital (2023). Bitcoin Volatility Analysis. Retrieved from https://www.blockforcecapital.com/bitcoin-volatility-analysis
[2] Coinbase (2023). Bitcoin Implied Volatility. Retrieved from https://www.coinbase.com/price/BTC/implied-volatility
[3] SEC (2023). Guidance on Exchange-Traded Products. Retrieved from https://www.sec.gov/rules/interp/2023/34-92023.pdf
[4] U.S. House of Representatives (2023). Cryptocurrency Regulation Bills. Retrieved from https://www.house.gov/cryptocurrency-regulation-bills
- The record low volatility of Bitcoin in July 2023, as seen in the Bitcoin Volatility Analysis by Blockforce Capital, was influenced by factors such as reduced hedging demand, market maturation, positive regulatory developments, and supply dynamics, which collectively fostered a more stable environment for investing in this digital currency, making it more attractive for institutional investors.
- In the realm of finance and technology, Bitcoin's investing landscape has seen significant changes due to factors like reduced volatility, improved market stability, and regulatory clarity, all of which have contributed to the growing acceptance and maturity of cryptocurrency as a legitimate form of digital currency.
