Bitcoin Volatility Drops to Lowest Level Since 2016 as Leverage Continues to Exit

Bitcoin has recently entered a phase of low volatility compression, with the 30-day average of its 1-week actual volatility dropping to 28.3, a decrease of about 31% from the peak of 41.6 on June 25. This level corresponds to approximately the 8th percentile of historical distribution since 2016, indicating that 92% of trading days in the past have experienced higher volatility than the current level. The 30-day momentum of Bitcoin's open interest (OI) relative to market capitalization has remained in negative territory for 21 consecutive days, suggesting that market leverage is continuously declining rather than accumulating in a low-volatility environment. The current price has rebounded about 11.4% from the June low, but this has not been accompanied by an expansion in derivative positions, reducing the risk of a large-scale liquidation cascade. Bitcoin is still below the 200-day moving average of $72,666; if volatility rises above 35 again but the price fails to break above the long-term average, it could increase downside risk.

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