Bitcoin Volatility Falls, but Extreme Price Swings Are Back More Often Than in 2018

Bitcoin has logged 10 unusually large trading days this year, more than the eight recorded across all of 2018, when it lost 73% of its value. These are called three sigma days, when the price moves at least three times its 30 day realized volatility. Yet annualized volatility has dropped to about 46% from 84% in 2018, and the average three sigma move is now near 7%, down from roughly 10%. Since 2024.

Why Calm Markets Can Mislead Risk Models

Value-at-risk models lean on recent price action, so a quiet stretch can make bitcoin look safer and push investors to hold more. Deribit CEO Luuk Strijers said VaR misses full tail risk, which is why the industry is shifting toward expected shortfall, and that these risks can be hedged with options.

What Drives Sudden Bitcoin Price Swings

Paradigm’s Nicolas Quatravaux pointed to macro shocks and crowded short volatility positions. Two Prime’s Alexander Blume said call overwriting is heavily crowded, so rallies can trigger short squeezes.

On Sept. 21, the latest three-sigma jump, Paradigm facilitated a record $6.7 billion in options trades, and no desk reported a bad hit. Quatravaux expects such days to persist.