Two Ways This Bitcoin Bull Market Is Sturdier Than 2020-21 and 2017

Bitcoin’s current bull run, starting in early 2023, contrasts sharply with previous cycles by exhibiting unusually low volatility and drawdowns. Data from Glassnode reveals that Bitcoin’s three-month realized volatility has averaged below 50%, a stark difference from the 80-100% seen in prior bull markets. Similarly, Volmex’s BVIV index, tracking 30-day implied volatility, shows a consistent downtrend.

This increased stability is attributed to Bitcoin’s growing market capitalization, exceeding $2 trillion and placing it among the world’s top seven largest assets. This substantial market cap requires significantly more capital to manipulate the price, inherently fostering stability. Furthermore, the introduction of US spot ETF products and increased regulatory clarity have attracted sophisticated institutional investors, further contributing to market maturity.

The price action itself tells a compelling story. Comparing the 2020-21 bull run, characterized by steep pullbacks exceeding 30%, to the current rally from approximately $30,000 to over $100,000 reveals a markedly different pattern. The current ascent resembles a stair-step rally, with impulsive upward moves followed by periods of consolidation before the next leg higher. Drawdowns have generally remained below 25%, with only two instances exceeding 30%, according to Glassnode.

This smoother trajectory is linked to increased institutional participation, reduced leverage, and less speculative excess. Previous bull runs saw exchanges offering 100X leverage, amplifying both profits and losses. This often resulted in liquidation cascades and significant price corrections. The subsequent reduction in leverage by major exchanges, such as Binance, has likely played a crucial role in the current market’s steadier performance, curbing speculative behavior and fostering a more sustainable bull market.