Bitcoin and silver are reflecting markedly different trends in the market as the year draws to a close, with volatility indicators showing one asset being actively repriced while the other remains stagnant.
In the past month, bitcoin’s annualized 30-day realized volatility has consistently decreased into the mid-40s, indicating a market that is range-bound and lacking strong conviction. Currently at 45%, the 30-day realized volatility is significantly lower than the 365-day average of 48%, as per TradingView data.
This volatility may seem considerable compared to established stocks, but it’s insignificant when compared to silver, the semi-precious industrial metal.
Silver’s realized volatility has escalated into the mid-50s, fueled by a sharp price increase, expanding physical premiums, and stress within global bullion markets. Realized or historical volatility reflects the actual price fluctuations of an asset over a defined time frame.
The disparity in volatility aligns with the price trajectories of both assets. While silver has surged over 151% this year, BTC has declined nearly 7%.
Silver’s substantial price increase is attributed to a mismatch in demand and supply. As demand from solar energy, electric vehicles, electronics, and battery technologies has risen sharply, supply has not kept up.
Moreover, China’s recent decision to enforce export licensing on silver starting January 1 has constrained physical supply expectations, with prices in Shanghai and Dubai trading $10 to $14 above COMEX rates.
The forward curve in London has steepened into a significant backwardation, indicating immediate scarcity, even as futures markets exhibit minimal stress, analysts contend.
Bitcoin, on the other hand, is trading nearly 30% below its all-time high of over $126,000 recorded in October. Many traders attribute the ongoing price decline to diminishing demand for spot ETFs and the waning DAT narrative, coupled with the October 10 crash that forced automatic unwinding of profitable positions, undermining investor confidence.
In a recent analysis, QCP Capital remarked that bitcoin’s recent price developments appear to be driven more by mechanical factors than a shift in market sentiment. The firm noted that holiday-thinned liquidity has heightened short-term movements, while large options expiry last week reset dealer positioning.
QCP further stated that about 50% of open interest rolled off post-expiry, leaving a considerable amount of capital on the sidelines and perpetuating the lack of directional confidence.
Prediction markets highlight this division. On Polymarket, betting on silver price levels by the end of January indicate strong confidence that prices will remain high, with limited expectations for a significant drop but only modest chances of near-term peaks.
Conversely, bitcoin markets predominantly anticipate the continuation of the current range. Traders assign approximately a 70% probability that bitcoin remains above $86,000 through early January, while the likelihood of it breaking out past $92,000 drops below 25%.
