Bitcoin (BTC) Volatility Surge: Realized Losses Climb Amid Market Turmoil

Key Takeaways

• Bitcoin volatility spiked in the first week of March.
• Realized Bitcoin losses were the highest in the cycle.
• How will these readings affect the market moving forward?
• Interested in buying or selling BITCOIN BTC? Read our review of the best exchanges to buy and sell BITCOIN BTC.

Bitcoin’s price movement since March 4 has been extremely volatile. In five days, the BTC price increased by 21% before falling by 14% and then increasing by another 14%.

This heightened volatility is the highest reading of the current bull run.

While Bitcoin bounced since, realized losses have spiked, meaning some traders have sold at a loss.

Keeping that in mind, let’s analyze these two indicators and their importance for the rest of the Bitcoin cycle.

Bitcoin Volatility Spikes

During last week’s price movement, Bitcoin’s realized volatility surged in multiple time frames. The Annualized Realized Volatility is an indicator that measures standard deviations of returns and compares them to the mean of returns.

While the 3-month (green) and 1-month (yellow) volatility spiked, the biggest increase was seen in the 1- and 2-week volatilities (orange and red), the former spiking above 110%.

This is the highest level since the Aug. 5, 2024, bottom and the April 2023 ones. In both previous times, short-term volatility increased to such a level that significant Bitcoin upward movements followed.

Realized Losses Increase

The total losses taken by traders during the drop were very significant. Realized losses spiked to $2 billion, the highest loss in the current bull run.

This was the highest loss since the FTX crash 2022, and the Net Realized Profit/Loss indicator turned negative for the first time in nearly a year.

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The on-chain UTXO Realized Price Distribution (URDP) indicator shows where the most recent Bitcoin UTXOS were created. The indicator reveals virtually no support cluster between $70,000 and $90,000.

So, if the price breaks below this level, BTC that is acquired above $90,000 could be forced to close and realize losses. Some of this already happened, with the cluster of $79,000 to $85,000 growing.

The biggest support cluster is near $60,000, which could provide a strong bounce if the price reaches it.

Critical Month Ahead

Bitcoin is entering one of the most important phases of the current cycle. Another dip below $80,000 would be extremely bearish for the current BTC cycle.

The thin order books below would likely cost at least $70,000, casting serious doubt about whether the bullish trend is still ongoing.