Bitcoin 3-sigma days exceed 2018 despite lower volatility

Author: Omkar Godbole

Compiled by Deep潮 TechFlow

DeepChaohao Summary: CoinDesk’s calculations show that Bitcoin has recorded 10 "three-sigma" trading days in 2026, surpassing the 8 such days recorded throughout the entire 2018 bear market, while the annualized volatility has declined from approximately 84% to about 46%. For VaR position models that rely on volatility, the apparent calm may encourage increased positioning, yet overlook the recurring tail events.

Bitcoin (BTC) has experienced more extreme price swings this year than during the 2018 bear market, even though its overall volatility has significantly declined—posing a challenge for those relying on standard risk models.

According to CoinDesk’s analysis, this largest cryptocurrency by market capitalization recorded 10 trading days in 2026 where its price deviated by at least three standard deviations from its recent trading pattern—more than the 8 such days recorded throughout all of 2018, when Bitcoin’s market value once plunged by 73%.

Traders use "sigma" to measure such extreme price movements—how far an asset’s price deviates from its normal behavior. To quantify these days, CoinDesk compares each trading day’s price change to Bitcoin’s 30-day realized volatility, which measures how much the price typically fluctuates on a daily basis over the past month. Any trading day with a price movement of at least three times that value—whether up or down—is counted as a "3-sigma day."

In a normal bell-shaped distribution, approximately 95% of fluctuations fall within two standard deviations, and 99.7% fall within three standard deviations. Thus, a three-sigma move itself is rare, and traders use it to mark exceptionally sharp swings. If such counts are high, it indicates that even as overall volatility declines, the asset remains prone to sudden jolts.

These findings suggest that Bitcoin has indeed become "calmer" over the years, but extreme trading days still occur—and such days have been more frequent this year than in 2018. This means that, relative to its recent volatility, Bitcoin is experiencing more abnormally large fluctuations, even though the magnitude of these fluctuations themselves has decreased. Bitcoin’s annualized volatility this year is approximately 46%, compared to 84% in 2018; meanwhile, the average magnitude of its 3-sigma fluctuations is around 7%, lower than the approximately 10% observed eight years ago.

“The fact that Bitcoin will still experience long periods of calm before suddenly repricing hasn’t changed. The market has matured, with deeper institutional participation, ETFs, and liquidity, so regular trading days are calmer. But shocks haven’t disappeared: macro factors, leverage, and positioning,” said Nicolas Quatravaux, Head of Europe, Middle East, and Africa at Paradigm, a leading institutional liquidity network in crypto derivatives.

Even compared to other highly volatile assets, this contrast is striking. Since 2024, Bitcoin’s volatility has been roughly comparable to NVIDIA’s, at around 47%. However, during the same period, Bitcoin recorded 26 three-sigma days, compared to just 8 for NVIDIA, 16 for the S&P 500, and 12 for gold.

Extreme volatility persists, posing challenges for investors who use volatility-based risk models to determine their Bitcoin positions.

A widely used metric is Value-at-Risk (VaR), which estimates how much a portfolio might lose on a bad trading day. Some VaR models heavily rely on recent price volatility, meaning that if trading has been calm for an extended period, assets may appear less "risky."

Therefore, the decline in Bitcoin’s 30-day, 90-day, and 180-day volatility metrics may encourage investors to increase their exposure. However, depending on how the model is constructed, this apparent reduction in risk may not fully capture the potential for unusually large losses.

It also estimates a loss threshold but does not inform investors how severe the losses could become once that threshold is crossed. This is known as tail risk—the rare but exceptionally large losses that fall outside the normal range of asset price movements. Bitcoin’s repeated 3-sigma fluctuations demonstrate that, even as daily volatility declines, investors must still account for such extreme outcomes.

"Standard VaR metrics do not adequately capture full tail risk, which is one of the main reasons the industry has shifted toward Expected Shortfall and similar metrics that account for tail risk," said Luuk Strijers, CEO of the crypto options exchange Deribit.

Expected loss measures how severe the losses are on the worst trading days, not just how often such days occur. Unlike using VaR alone, this approach helps investors understand the potential impact of extreme losses.

“If a portfolio’s objectives do not account for tail risk, then the calmer Bitcoin may encourage larger allocations, making the portfolio more vulnerable to sudden price spikes,” said Strijers.

He added that these 3-sigma risks can be hedged using Bitcoin options.

Market participants pointed out that unpredictable macroeconomic shocks and highly leveraged options positions are the dual drivers of these high VaR trading days.

Paradigm's Quatravaux said this year is a good example.

“It started slow, with capital rotating into tech stocks, then a series of DeFi hacks pushed people toward selling volatility and structured products to chase yield. Then you’ve got Trump, a war with Iran, the Fed—and everyone is short volatility in a narrow range, so a single headline is enough to give you an extraordinary trading day,” he said.

Essentially, risk accumulates when traders bet that prices will remain relatively stable. Such positions involve selling (shorting) options—essentially insurance against large price movements—in exchange for collecting premiums.

These strategies work well when the market is quiet. But when major macro headlines hit and prices suddenly swing violently, these sellers can get caught on the wrong side, and their rush to cover positions may turn a single fluctuation into a full-blown shock.

Alexander S. Blume, co-founder and CEO of Two Prime, a registered investment adviser with the U.S. Securities and Exchange Commission, highlighted a particularly popular variant in this type of trading called covered call writing. Investors sell call options on their held Bitcoin, giving up some upside potential in exchange for the steady income from option premiums.

“I believe that despite the overall volatility converging, the significant increase in derivatives market positions still allows for relatively frequent large swings. Currently, covered calls are a highly crowded trade. When we see rallies like the one over the past month, they can trigger short squeezes and amplify volatility,” said Blume.

The good news is that the market's ability to absorb these fluctuations has improved compared to the past.

On September 21—the day of Bitcoin’s most recent 3-sigma spike—Paradigm facilitated a record $6.7 billion in options trading.

“This time, we didn’t see or hear of any exchange suffering major losses,” said Quatravaux.

"Participants are much more sophisticated than they were a few years ago, risk management has improved significantly, and there is far more institutional capital in the market, so a difficult month is often just a difficult month," he said.

Just don’t expect these wild fluctuations to stop.

“They will stay. Ten years of data show that these days haven’t disappeared as the market has matured, because macro shocks aren’t going anywhere,” said Quatravaux.