jakiro
Source: On-Chain Mind, compiled by: Shaw bitchain vision
Bitcoin’s volatility is currently at the lowest range of weekly volatility since 2015.But the question we need to ask is simple: Should we be worried?Or is this calm just a precursor to the next important stage of Bitcoin?
In this article, we will explore the nuances of Bitcoin’s evolving volatility, introduce advanced indicators such as “market entropy”, and reveal that these quiet times often contain the greatest opportunities.
Overview of key points
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Volatility compression: Bitcoin’s price fluctuations are consistent with traditional assets such as gold and U.S. stocks, indicating that it is integrated into the global financial ecosystem rather than being in isolation.
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Volatility ≠risk: Low volatility does not mean safety, and high volatility does not mean disaster; the real risk lies in permanent losses, and the risk of permanent losses of Bitcoin is now slim compared to the risk of depreciation of fiat currencies.
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Entropy is opportunity: High market entropy (measures disorder of price volatility) usually precedes major trends, turning chaos into a predictor of bullish breakthroughs.
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Historical precedent: The calm period of low volatility is often ready to go like a spring, driving Bitcoin to rise sharply, which highlights the need to remain vigilant during the calm period.
Return to calm
Bitcoin has undergone profound changes since 2020: volatility has steadily declined.This is not a coincidence, butThe manifestation of market maturity.To quantify this, let’s take a look at the rolling annualized volatility, a standard indicator that measures the standard deviation of price changes over a year and is adjusted for an annual basis:
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Bitcoin:30%
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gold:14%
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Nasdaq 100 Index:12%
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S&P 500 Index:10%
Volatility is still roughly equivalent, but risk-adjusted returns are still significantly more favorable to Bitcoin
The compression of volatility reflects Bitcoin’s increasingly mature position in global finance.It is no longer a niche speculative asset; it is increasingly acting like an integral part of the broader financial ecosystem.Nowadays, when evaluating Bitcoin’s behavior, we must consider the macroeconomic cycle, the dynamics of risk appetite and risk aversion, and the correlation with traditional markets.
This compression of volatility has raised some intriguing questions: Is Bitcoin taming itself, or is the market just pausing?Historical data show that it is often the latter.Times of sluggish volatility are often the prelude to a sharp rise in prices, and investors who mistakenly think that this state will last forever may miss the opportunity.
Volatility ≠risk
One of the most ingrained misunderstandings in Bitcoin/cryptocurrency investment is to equate volatility with risk.Let me clarify:
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VolatilityIt measures the amplitude of price fluctuations (or statistical indicators of profit dispersion) over a period of time.
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riskThe possibility of permanent capital loss or catastrophic event is assessed.
In the early days, Bitcoin did face an existential crisis.Questions about its survival, popularity, and correlations in long-term value have sparked heated debate (if you remember the situation at that time).Today, Bitcoin has millions of users, institutional investments, and even widely adopted by the state, so the possibility of it disappearingAlmost negligible.
Nevertheless, some risks remain:
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51% attacks are theoretically possible;
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Quantum computing may eventually challenge the Bitcoin crypto protocol.
But compared with fiat currencies, the purchasing power of the US dollar is lost every year due to inflation and printing of money.8%-10%, and the central bank’s policies will inevitably lead to the depreciation of the US dollar.In my opinion, the risk is already quite high – thisThe inevitable loss of capital.
On the other hand, Bitcoin has been in every five years since its birthAchievement of 1000% of returns not only outperformed inflation, but even surpassed the US stock market.For me, Bitcoin is starting to become a long-term “help-haven” asset——A means of store of value that is not affected by currency depreciation. From a more macro perspective, temporary fluctuations are no longer so worrying.
Riding the wind and waves
The volatility wave graph visualizes short-term cycles by applying the actual volatility of 7 days and smoothing with an exponential moving average (EMA).This transforms the original price fluctuations into easy-to-understand “waves” that highlight potential trends.
“Calmness” is often a precursor to the arrival of a “storm”.
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Low readings usually indicate that the market is in a consolidation state and is about to break through.
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There are often rapid and unexpected price fluctuations after the calm period.
Even during periods of low volatility, severe fluctuations still occur.Bitcoin’s historical pattern shows that calm consolidation periods often herald explosive trends.These moments themselves are not risky – they represent the accumulation of potential energy in the market, waiting to be released.
These “circling spring” stages often make ordinary people careless and complacent.It works as follows: liquidity increases, giant whales accumulate, shorts pour in, and the catalyst releases suppressed energy.Bitcoin’s asymmetry is highlighted here: the downward peak is sharp but short-lived, while the upward trend often lasts for a long time.
Volatility Fractal—Aggregation and Breakthrough Signals
Volatility fractal utilizationFractal pivot (outlines the local highs and lows of market volatility)to identify volatility aggregation.This method measures the intensity of current fluctuations relative to recent structural points, thereby providing a dynamic perception of market concentration.
Any reading above 30 is considered “high volatility” – a potential opportunity for mean regression is required
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Light purple: The fluctuation is more concentrated.
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Deep purple: Indicates a milder and calmer environment.
A significant threshold appears inRead about 30, marks the moment of a major breakthrough – whether it is up or down.Historical peaks coincide with major market events, including major ups and downs (see chart above).
Contrary to popular belief, the participation of institutional investors—such as exchange-traded funds (ETFs) and corporate treasury—has not curbed Bitcoin’s price volatility.Even after Wall Street got involved in Bitcoin, the volatility fractal chart shows that prices still fluctuate significantly.Institutional investors increase liquidity rather than act as a suppressive effect; they amplify fluctuations through leveraged products.
In this cycle, consolidation after soaring is also common, and the volatility range digests recent gains.But that doesn’t mean that the price volatility we know is over.
Fractal charts keep reminding us:Monotony will trigger breakthroughs.
Market Entropy: Measuring Chaos
Now, please read the last part patiently, it’s a little bit more complicated than what I usually have, but I found something very profound.
The following indicator is called volatility entropy.My previous job was particle physics, so the concept of entropy was quite intuitive to me.But for those who are not familiar with it, entropy is basicallyIndicators that measure disorder, randomness, or uncertainty in a system.
This “market entropy” uses the concept of information theory (and thermodynamics) toQuantitative disorder and unpredictability in price changes.In physics, the higher the entropy value, the stronger the randomness, and the lower the entropy value, the stronger the orderliness.In the market, we can observe:
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High entropy: The price trend is chaotic and the market behavior is unpredictable;
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Low entropy: Orderly trends, stable accumulation and predictable price fluctuations.
Take a look at what this chart shows:
High readings of market entropy are often accompanied by market uncertainty and intensified volatility, and will usually rise significantly later.The current extremely high readings show that the market has reached a continuous trend.
For those technicians – this indicator puts logarithmic returns into discrete categories and calculates the rolling Shannon entropy within the definition window, thus deriveing a standardized measure of the degree of disorder and chaos in the market.
Why do I measure market entropy:
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Opportunities are hidden in chaos: The largest price increase in history occurred after the high entropy period.
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The market seeks order: Chaos are temporary; human behavior will naturally tend toward predictable structures.
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Current background: The high entropy since May 2025 shows that there is widespread uncertainty in the market and no consensus has been reached in the direction.
From a practical point of view, entropy can help us predict when a calm or chaos may end, often heralding a significant trend in the coming months.
My opinion on the current market
at the moment,Bitcoin seems to be holding its breath.Volatility has declined in the past few years, but under the calm, there is a market that is ready to go.Volatility waves indicate that energy is quietly accumulating, while fractals highlight some areas of concentrated activity – breakthroughs may come from anywhere.At this point, complacency is dangerous; the market may fluctuate violently in one direction, and those who expect to maintain the status quo may be caught off guard.
Please remember:Bitcoin’s 80% gains occur in 10% trading days.
What really impressed me in this article was the market entropy.We are in a phase of extreme chaos, which rarely lasts for a long time.When entropy soars, human behavior begins to work.As investors, we desire predictability, and once the pattern begins to emerge, the trend will accelerate rapidly.Historically, high entropy values have been a harbinger signal of large fluctuations, and the market is almost full of this possibility.
Institutional investors have not tamed bitcoin either – they are honing its edge.ETF capital flows, corporate treasury allocation, and leveraged products create areas where liquidity is concentrated, which amplifies rather than suppresses volatility.This means that when a trend is finally established, its momentum can be very strong.
For me, it is not the time to hesitate.It should be watched closely now, anticipate opportunities in chaos and be prepared to take action as the market finally resolves the current problem.
A calm market is deceptive; but there is real signal in chaos.
