After amassing a decline of 14 percent in June, it’s been hard to predict a bitcoin bull’s run over the past few weeks. July began the second half of 2020 and early price movements indicated positive signs for the largest digital asset. On 6 July Bitcoin breached $9333 and at press time the asset was valued at $9,183.75.
Despite market uncertainty, a recent report by Bloomberg Intelligence suggested that Bitcoin might be sustaining a “resting bull run” behind the covers. Some of the main indicators discussed in the report were with respect to on-chain addresses, investor flows, and declining volatility.
Bitcoin volatility approaches a 3-year low index
According to Bloomberg Intelligence, Bitcoin has recently plummeted to its lowest level of volatility compared to crude oil, suggesting that BTC could slowly create organic demand for the asset while slowly attenuating to mainstream investment markets. The social-distancing enabled environment has played a part in bitcoin’s strength as investors have gradually seeking exposure to the best performing asset of the past decade.
With Bitcoin gaining higher on risk basis vs stocks, the asset has currently attained an upper hand on NASDAQ based on historical volatility. The report stated,
“The crypto’s 260-day volatility measure is the lowest ever vs. the stock gauge. Our graphic depicts Bitcoin volatility is about 2x Nasdaq’s. It was closer to 7x when the crypto price and index first crossed paths in 2017. Bitcoin volatility typically increases when its price rises, and the relationship is normally inverse for equities.”
Bitcoin-Gold Ratio; History repeating itself?
With respect to Gold, Bitcoin’s decline in volatility is a direct indication that that digital asset is becoming less risky in the market. Currently hitting a new low in 2020, the above graph suggests that the last time BTC volatility remained at such low levels, the asset went on to register its largest bull run in history in 2017. Since then, the annual Bitcoin-risk metric has dropped below 70 percent from just above 100 percent.
Now, a long-term drop in volatility across the past 3 years might suggest that BTC is currently poised for a trend reversal but Gold’s volatility is currently doing the opposite, with its annual risk measure reverting higher from a two-decade low in 2019.
With the price struggling to break long-term resistance at $10,000 since May, BTC will eventually break above the threshold at some point in time. However, it is imperative for the bull run to be based on strong fundamentals if the impending rally is aiming to embrace another all-time-high.