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In Numbers: Comparison of Bitcoin’s Most Volatile Day of 2022



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In Numbers: Comparison of Bitcoin’s Most Volatile Day of 2022


Bitcoin has had its fair share of highly volatile days since its inception. This is not surprising given that volatility remains one of the most important features of cryptocurrencies and this volatility is a huge draw for investors. However, there have been days when volatility has been above normal, usually after strong market downtrends. One of those days was recorded recently, reaching new highs in a year.

Bitcoin volatility increases

A recent report from Arcane Report showed that, as of Thursday, bitcoin volatility hit highs not seen since May 2021. This analysis used the digital asset’s average hourly high-low spread across spot and perpetual markets. What this returned was that the volatility levels seen last Thursday were at levels last seen in May 2021, at which point the market was going through a period of crashes and crashes.

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The hourly average of high and low prices for May 12 showed a differential of 3.68% in the spot market. Comparatively, the last time numbers like these were recorded was on May 20, 2021. However, this is not the highest volatility.

BTC volatility hits highest level in a year | Source: Arcane Research

At the beginning of 2020, the volatility had been much higher due to market movements. The most volatile day for bitcoin would be recorded later that year in March. Game 13, a momentous day for investors, was touted as bitcoin’s most volatile day. The deviation of the spot market from the hourly average had reached 11.91%. However, 2021 has been one of the most volatile years for the digital asset, reaching highs of 6.81% of spreads.

What triggers volatility?

While a number of factors can trigger intense volatility in a digital asset like bitcoin, the most obvious culprit has been periods of intense selling. During these periods, the price of cryptocurrencies like bitcoin dropped significantly, causing even more selling.

BTC sinks in the early hours of Tuesday | Source: BTCUSD on TradingView.com

The destabilizing effects in the derivatives markets, as well as the reversal of leveraged positions, can also have a ripple effect that is felt throughout the associated markets. That was what the market witnessed on Thursday, leading to the most volatile day so far in 2022.

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Arcane Research also notes that the cash market may also see more “extreme differences” in stress compared to its perpetual counterparts. The report also adds that the liquidity available in the perp market may incentivize active market participants to react more effectively to rising volatility. In contrast, spot markets tend to be slower to react to sudden market disturbances.

Nikkei Asia Featured Image, Charts from Arcane Research and TradingView.com

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