11 Oct 2022

BVOL trailing below 25 for a record long duration

BitMEX’s BVOL index represents another way to gauge volatility. Currently, BVOL trails below 25, a level that has previously preceded huge moves.
Source: Tradingview (Coinbase, BitMEX)
BitMEX’s BVOL index has reached historical lows below 25. This is the fourth time BVOL has fallen below 25 since launch. Large and volatile moves in BTC have followed all previous BVOL prints below 25. However, the current regime differs from the previous in that BVOL has ranged consistently below 25 since mid-August. BVOLs first visit below 25 in 2018 lasted for 18 days and was followed by BTC plunging from $6k to $3k.The other two occurrences were even shorter lived. In March 2019, BVOL briefly fell below 25 for two days before BTC recovered from $3k to $6k. The third occurrence of BVOL below 25 occurred in the summer of 2020 and was offset by BTC making a push to $12k. This low BVOL regime has lasted for 47 consecutive days. This illustrates that the current low volatility regime is unique when contextualizing the volatility to previous slow times in the market. In isolation, low volatility is not an interesting observation. However, accompanied by potential near-term catalysts with this week’s CPI release, soaring leverage in derivatives, and declining IVs, this environment may generate opportunities for sophisticated traders.
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