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Bitcoin volatility

Bitcoin Below $10.5k: Where’s it Going From Here?

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After weeks of enticing a move above the resistance of $12,000, Bitcoin has finally fallen prey to enormous bearish pressure from the top. On 1st September, Bitcoin first exhibited a rally above $12,000 but within a 12-hour period, the digital asset shed over $1000 dollars in the charts.

Suddenly from being extremely bullish, concerns have started to arise about Bitcoin’s immediate future. We analyzed the current markets and with respect to the collective market trend, the current low might sustain for a while.

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The 1-day chart Bitcoin chart from the trading view highlighted Bitcoin’s movement under the $10,500 resistance as mentioned earlier. The support at $10.5k wasn’t breached over the past month until yesterday. The gap between the current price and immediate resistance at $11,400 becomes immensely wide at the moment, with little chances of recovery right away.

Another major indicator waving red flags in Bitcoin’s face is the 50-Moving Average. It is not acting as underlying support anymore, becoming an overhead resistance at the moment. Right now, it is early to call whether Bitcoin will attain a quick recovery or there will be further decline.

However, the community was inclining towards the latter.

Bitcoin heading down to fill CME gap at $9,600

For some analysts, Bitcoin’s bottom at the moment will arrive at $9.600 due to the apparent CME gap. During the past month’s rally, a CME gap between $9700 and $10,000 was established and the common consensus is that just gaps get filled in the ecosystem whenever they are seen at close proximity to current prices.

In the meantime, Bitcoin’s strong correlation with traditional stocks has also been considered a legitimate reason. During the past 48-hours, Major stocks such as the S&P 500 also dipped in the charts, and Bitcoin commentator Lark Davis suggested,

However, the correction entertained by Bitcoin may do well for the prices as well, going forward. Due to consistent movement between a fixed range over the past 5 weeks, Bitcoin’s Realized Volatility had hit a yearly-low.

skew btcusd iv vs rv 3

As observed, after dropping down to 2.2%, the RV levels spiked a little over the past 24-hours, indicating a little turbulence. For Bitcoin’s price to stay lively in the charts, RV should remain high but it is important to note that high BTC RV can push the price down as well.

BTC’s imminent destination is unclear

With the absence of general clarity in the market, it is unlikely that Bitcoin will rise immediately at the moment. The buyers exhibited exhaustion and right now, the coin would need to re-instated a trend itself over the next few weeks. The overall trend remains bullish from a yearly-perspective but it mirrors the bearish stretch witnessed during the end of 2019.

Bitcoin Bakkt Futures Settles 11,706 BTC; CME Reaches an OI of $726 million

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The domino effect in play for Bitcoin seems to be in full throttle.

After bitcoin surpassed its yearly high in February, the largest digital asset created a ripple effect in multiple directions. With on-chain fundamentals improving in the charts, Bitcoin’s derivatives market was incurring major change as well.

CME and Bakkt have been two of the most important exchanges for Bitcoin that have promoted the involvement of institutional investors in the digital asset space.

Many believed that Bitcoin’s next major bullish rally would emerge from the participation of accredited investors, and according to recent developments, things are likely to move in that direction at the moment.

skew bakkt bitcoin futures total open interest volumes

According to Skew analysis, Bakkt futures reportedly recorded its highest BTC physically-settled contracts, amassing a whopping 11,705 futures on 29th July. The futures contracts were valued at over $125 million. The platform that is backed by Intercontinental Exchange, announced on Twitter,

Now alongside Bakkt, CME was registering a heightened level of activity on its platform as well.

According to data, the Open-Interest in CME cash-settled Bitcoin futures surpassed its previous all-time high with a massive surge of up to $724 million.

skew cme bitcoin futures total open interest volumes

At illustrated in the above chart, the OI on the CME platform witnessed a huge spike over the past 48-hours which led to the exchange passing its previous high of  $530 million.

CME’s high open-interest is currently accompanied by an average daily volume of $308 million as compared to $285 million witnessed in the month of June. Although, the daily volume had spiked up to $1.7 billion in the charts during the Open-Interest rally.

Implied Volatility spikes after consistent lows

skew btcusd iv vs rv

One of the surprising trends consistent throughout the year has been Bitcoin’s volatility. Despite a high level of activity in February, April-May, and now in July, volatility has been under the radar. Bitcoin’s volatility has been so low that other traditional stocks appeared to be more volatile in nature than Bitcoin.

However, the recent spike is creating a bit of a change. Bitcoin’s Implied and Realized Volatility, both underwent a minor spike during the recent rally. Both the volatility levels had recently registered their yearly-low at 3.1% and 3.0% respectively, so it will probably take a while before it reaches previous high levels.

Low volatility levels are a positive sign from a long-term perspective as they indicate the maturity of an asset.

Bitcoin Volatility Level Hit 3-Monthly Low; Bullish or Bearish?

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2020 has reached its half-point in less than 2 weeks and the digital asset industry is gearing up for the second half of the year. Betting against Bitcoin early this year would have been a grave mistake as the largest digital asset defied market odds and performed better than S&P 500, Gold, and so on after the March market collapse.

Bitcoin’s volatility has been its major strength this year as market turbulence has played in BTC’s favor for a majority of the period.

However, the price action has dried out late, and significant consolidation has been attained between $9k and $10k. Such stagnation has lowered its volatility levels, and according to the recent Coinmetrics report, daily volatility has reached its lowest point in the last three months.

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Data indicated that the rolling volatility of BTC ‘s 30-day average had fallen below the 50 percent level and since November 2013, it has only happened 35 times. BTC rarely attains current volatility levels but such unexpected turnarounds were the theme of 2020.

 

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The chart above illustrated the period of time when Bitcoin’s 30-day volatility has been below 50%. From the aforementioned 35 times, 80% of those periods had lasted less than 20 days, with 55% lasting less than 10 days. Hence, it is fair to say that Bitcoin’s 30-day rolling volatility has historically remained at subdued levels for only a short duration at a time.

In order to find whether the current trend is bullish or bearish, the report also listed out what happens after the volatility levels jump back above the 50% mark. The report stated,

“The results are mixed – sometimes price rises and sometimes it falls. The median and mean therefore both hover around 0% up to 40 days out.”

Bitcoin Realized and Implied Volatility levels low as well

skew btcusd iv vs rv

Bitcoin’s volatility in terms of options pricing has also decreased in recent weeks. After a steady decline in Implicit Volatility since April, Bitcoin’s Realized Volatility underwent a major slump last week and RV levels dropped to 4.1 percent from 6.8 percent.

Although Realized Volatility accounts for the turbulence period that has already occurred on the market, low volatility levels may suggest exhaustion of buying pressure. Q2 2020 will also reach a conclusion by the end of June, as a new start for the digital asset will begin in Q3 2020.

Bitcoin Needs a Strong Bottom rather than High Trading Volume to Breach $10,500

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The first week of June was interesting for Bitcoin. As we entered the last month of Q2 2020, the largest digital asset attempted, for the fourth time in 4 weeks, to break its psychological resistance by $10,000. Just like the last four times, the asset managed to surpass the range but failed to retain its position. Within a 24-hour window, Bitcoin slumped by $500, and at the time of writing, the valuation amounted to $9650.

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However, unlike the past three times, the value of Bitcoins has risen to $10,400, testing the yearly high of 2020, according to Arcane’s weekly update. The re-test suggested that Bitcoin could further aim to re-test at the same mark in order to make it stronger than $9,500.

Alongside the price, another bitcoin on-chain metric witnessed a trend reversal.

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The above chart illustrates that, after consecutive weeks of declining volume, the 7-day average real trading volume of Bitcoin registered a definite surge. The report indicated that strong trading activity over the coming weeks could be essential for the price to sustain its underlying buoyant momentum. Any price pump could possibly be triggered by these key activities. However, the assertion may not be completely necessary.

Strong Bottom before Yearly-Highs

One of the main reasons why Bitcoin has plummeted dramatically over the last two weeks of February is due to its urgency from 1 January to 14 February 2020. The price went from $6700 to $10,450 in a flash without setting up a strong bottom. Any healthy market requires consistent market correction periods to breathe. Once a position has been maintained at a certain distance, it will embark on another rally.

At the moment, we could be witnessing something similar. Rather than continuing high trading volume or increasing 7-day average trading activity, it is more important for Bitcoin to remain above the current $9,500 support.

If the price loses support at $9,500 and falls below $9,200, the selling pressure could drag the asset down to $8,000. It remains imperative, therefore, that Bitcoin maintain its current position.

Bitcoin Volatility on the rise 

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After the low volatility level after the end of Bitcoin has halved, the 7-day volatility is now again above the 30-day average, indicating a volatile period in the future.

The uptick could have been due to the fact that BTC went up by 10 percent and shaved 10 percent right after 24 hours, so the volatility needs to be observed over the next few days. Another outburst may trigger a breakout in either direction, depending on the purchase or sale of the pressure momentum.

Bitcoin’s Volatility has been its Key Factor Towards Improved Adoption and Awareness

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Volatility has been an important part of Bitcoin and its role is undeniable in Bitcoin price rise over the past few years. The asset has also been criticized for the same trait in traditional markets, as the token was considered highly volatile by the regulators.

However, despite the nit-picking of traditional asset class proponents, the volatility of Bitcoin has also been key to its wider adoption. Bitcoin’s price volatility has allowed the asset to reach the mainstream public. Its speculative nature has led to the creation of market curiosity, and BTC has started to attract the attention of the financial market.

Bitcoin’s 2017 and the market boom

Bitcoin may have been introduced to the world back in 2009 but was propelled to recognition after a massive rally in December 2017. Bitcoin’s valuation jumped all the way to $20,000, and news media around the world covered its growth. During the same period, Coinbase also became the most popular application in the United States as new users began to flock to the industry.

However, it’s important to note that Bitcoin crashed all the way down to $4000 in January 2018. Given the almost 80 percent fall in prices, a significant proportion of users remained in the industry. The same group of people started to gather more knowledge and stuck around in the space.

Kraken also saw a similar spike in sign-up in March 2020 with Bitcoin falling all the way down to $3800 on March 13. Bitcoin was back at $6995 at the press time, and data revealed that active BTC addresses have also improved in the past few months.

Bitcoin prices may go up or down, but Users continued to rise

A recent report for LongHash suggested that, according to Chainalysis, 90 percent of Bitcoin activity is related to exchanges. Exchanges are the prime institutions in the industry that speculated around the valuation, hence it is only obvious the users would flock in the most during times of price swings.

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The above chart clearly illustrates that most searches of the largest digital asset have taken place during moments of higher price movement and these search trends were common all around the world.

The largest asset has been keen development on the technological forefront as well but the majority of people are only concerned with the asset’s valuation.

Hence, Bitcoin’s volatility has been a blessing in disguise for the largest crypto asset and it has been largely responsible for Bitcoin’s growth over the past 4 years.