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The most volatile day in Bitcoin price in 2022

 


Bitcoin has seen quite a few highly volatile days since its inception. This is not surprising as volatility remains one of the most salient features of cryptocurrency and this volatility is a major draw for investors. However, there have been days when volatility has been higher than normal, usually following large market downtrends. One of those days was recorded recently, setting a new yearly high.


Bitcoin volatility increases

A recent report by Arcane Report showed that Bitcoin volatility last Thursday was the highest since May 2021. This analysis used the average hourly digital asset high-low difference in both spot and perpetual markets. As a result, last Thursday's volatility was at levels last recorded in May 2021, a time when the market was going through a period of dips and drops.


The hourly average of the high and low prices on May 12 showed a 3.68% divergence in the spot market. For comparison, the last time such a level was recorded was on May 20, 2021. However, this is not the highest level volatility has ever reached.


At the start of 2020, volatility was much higher given the market movements. The most volatile day for Bitcoin would be recorded later in March of the year. March 13, a memorable day for investors, has been cited as the most volatile day for Bitcoin price . The hourly average deviation on the spot market was up to 11.91%. However, 2021 was one of the most volatile years for the digital asset, where the deviation peaked at 6.81%.


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What is the trigger for volatility

While there are a number of factors that can trigger severe volatility in a digital asset like Bitcoin, the most obvious culprit is periods of sharp price falls. During these periods, the price of cryptocurrencies like bitcoin dropped significantly, leading to even more sell-offs.


The destabilizing effects on derivatives markets and the unwinding of leveraged positions can also create a domino effect affecting all related markets. That was the case on Thursday, leading to the most volatile day of 2022 so far.


Arcane Research also notes that the spot market may exhibit more "extreme differences" in terms of stress when compared to its perpetual counterparts. The report adds that the available liquidity in the Perps market can induce active market participants to react more efficiently as volatility increases. Conversely, spot markets tend to react more slowly to sudden market shocks.

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