Crypto markets are known for their violent volatility, capable of both spiking and collapsing rapidly. Surprisingly, that has not been the case this year. Volatility has been steadily decreasing across the space, with Bitcoin’s realised volatility over a rolling one-month window now at a three-year low.

The asset is up 76%, hovering around the $30,000 mark, yet the run-up from the low of $15,500 late last year has been characterised by a steady climb rather than the turbulent volatility we are used to. The trend isn’t unique to Bitcoin either, volatility is declining across the board – Ether’s price is now trading with similar volatility to Bitcoin’s, having historically been more volatile.

This low volatility is positive in one sense, as it helps to dispel one of Bitcoin’s most criticised features: its extreme volatility. Unfortunately, it is not welcomed by traders who rely on volatility, so spot trading volume has dropped significantly due to a number of factors, including regulation, a decrease in prices, lockdowns ending, and scandals. Derivatives trading volume has also fallen since April, though liquidity is not as much of a concern.

Despite the decline, crypto volatility still remains much higher than other asset classes. Bitcoin’s annualised volatility of 25% would not be deemed low-risk. To put this into perspective, the daily returns of Bitcoin are on a completely different planet to gold.

It is hard to predict what will happen in crypto markets, but it is unlikely that digital assets’ volatility will stay at these uncharacteristically low levels for long. With the interest rate hiking cycle coming to a close, markets could soon be at an inflection point, possibly leading to an increase in volatility.