The 11.4% drop in Bitcoin (BTC) last week may seem unexpected or out of the ordinary. The truth is, the lack of a complete correction after the 50% drop on March 12 was an extraordinary part.

Some analysts and investors said the current DeFi boom is an unmistakable sign of excessive optimism, with some recently released tokens reaching $ 1 billion in market cap.

However, unlike the crazy 2017 ICO, when most projects failed to launch their network, most of the current DeFi tokens already have an effective product.

Regardless of the strengths and weaknesses of each project, it is important to focus on broader market indicators to look for predictive signs of a potential collapse.

Bitcoin volatility has been relatively calm
Bitcoin’s realized volatility measures the extent of daily price fluctuations, and high volatility indicates that the price can change significantly over time in both directions.

This indicator may seem counterintuitive, but periods of low volatility pose a greater risk of explosive moves. This is partly due to the fact that realized volatility is an indicator of hindsight. During quieter periods, traders tend to overuse leverage, causing larger adjustments during sharp price fluctuations.

The distorted data shows that Bitcoin’s 90-day volatility was 42% on September 1, near its lowest level since 2017. The period of quiet volatility in itself is not an indication of an imminent dump.

Volatility does not separate the beef and bear markets because it only measures the absolute daily volatility. You should then focus on the most recent performance of Bitcoin to understand current market behavior.

Regardless of which market is analyzed, even the 1900% of bullish trends that Bitcoin pulled out in 2017 saw weeks of declines of 5% or more. It was 13 negative weeks in an amazing year, around the beginning of March 5th.

Before declining 11.4% last week, Bitcoin has risen 146% since March 11th. Here are the top and bottom eight weeks for this period.

Note that there were no weeks down 5% or more. This is unique in Bitcoin’s history. This procedure is clearly unusual and perhaps a clear sign of irrational exuberance.

Bitcoin dominance drops to its lowest level in 14 months
In absolute terms, BTC’s dominance doesn’t usually matter much. Some critics do not like the indicator, as it weighs every alternative currency, regardless of size. Bull markets were seen during times of low Bitcoin dominance, and at times rallies caused bitcoin’s price to spike.

As per the chart above, BTC’s dominance has decreased from 69% to 59% in less than four months. The last time Bitcoin lagged behind altcoins was in April 2018, that is, two years ago.

Please note that an absolute level of 59% is not usually. Despite a 14-month low, it remained below 60% for most of 2018 and mid-2019.

Source: CoinTelegraph