Bitcoin’s characteristically high volatility could return soon, giving exhausted traders an end to months of abnormally calm price action. A new metric for on-chain activity makes this prediction by measuring exchange volumes and on-chain transaction volume together to derive a signal for inflection points in bitcoin volatility.

Published to popular charting interface TradingView on Tuesday, the indicator calculates a ratio of relative dominance between bitcoin trading volume on exchanges to transaction volume happening directly on the Bitcoin blockchain. The exchange data is taken from eight leading exchanges and 23 trading pairs. 

On-chain transaction volume includes bitcoins moved between wallets and possibly to or from exchanges. Exchange volume is the amount of bitcoins bought and sold over a given time period. 

The volume ratio aims to derive market sentiment as a function of both types of volume. When overlaid with price data, high on-chain transaction volume dominance over exchange volume frequently corresponds with imminent, significant price movements, or volatility.

Unlike traditional markets, transaction volumes and other on-chain data allow cryptocurrency traders to watch investors move their assets in real time. These indicators can often signal significant shifts in the market and show important investor activity that could serve as a catalyst for “massive moves,” especially during periods of low volatility, according to Josh Olszewicz, cryptocurrency trader at Techemy Capital. 

“We are primed for the same type of move now,” Olszewicz told CoinDesk.

Why does on-chain volume dominance frequently precede large price movements? One reason could be “whales” and other large investors buying or selling large quantities of bitcoin through over-the-counter desks and prime brokers or simply moving coins to exchange wallets in preparation to buy or sell. 

These movements are reflected in on-chain transactions but not exchange volume as represented in this ratio, explains Jean Baptiste Pavageau, partner at Paris-based quantitative trading firm ExoAlpha. The size of these transactions can often move the market, however, and when a new trend emerges retail investors “often tend to push and extend the move by buying on exchange directly,” said Pavageau, which is reflected in increasing exchange volume that reduces on-chain volume dominance. 

As a predictive tool, however, the volume ratio measure is imperfect, and some traders are skeptical that this volume ratio – or any market analysis – is useful for timing changes in volatility and price trends. 

Read more: Bitcoin Volatility Metrics Are Like November 2018 All Over Again

“Metrics and analysis tell us the conditions that are present. They don’t give you a time catalyst,” said Zoran Scekic, managing partner at Zorax Capital. “If they did then everyone would be rich knowing when to buy or sell volatility.” 

Bitcoin’s volatility has steadily dropped more than 68% during the past two months, according to Coin Metrics, as the price continues to trade in a tight range between $9,000 and $10,000. 

“This ratio only tries to highlight the fact that a move should happen, but we have no timing indication,” said Pavageau. 

“Everyone has been saying volatility is imminent for the last several weeks,” added Scekic. “The truth is, no one knows.”