Recent data from the analytical firm, CrystalClear Insights, shows that Bitcoin’s volatility has hit an all-time low. The asset’s Bollinger Bands have a mere 2.9% difference, indicating an incredibly tight trading bracket. Such a scenario occurred only twice before: in September 2016 at around $600 and in January 2023 at $16,800. Learn more about Bollinger Bands.
Bitcoin’s Trading Bracket
The study reveals that during times of low volatility and investor weariness, coin movement shifts based on their current price proximity. This suggests that traders either make minimal gains or losses when they exit. The analysis further indicates that we need a new price bracket to encourage new investments, which could lead to a volatility surge.
Reflection of the Larger Market
Bitcoin has traded in a tight bracket, specifically between $29,050 and $29,775 in recent weeks. This unusual trend resulted in an incredibly low annualized 30-day volatility of 17%. The main question here is whether this trend is unique to digital currencies or if traditional markets like stocks, oil, bonds, and fiat currencies also reflect it.
Both the S&P 500 and the oil price recorded their lowest volatility levels since November 2021. However, the DXY index showed a different trend, increasing to 8% from 6% in May 2023. Additionally, the 10-year Treasury yield rose from its 18-month low of about 10% to its current 16%. These patterns might have influenced Bitcoin’s reduced volatility.
Short-Term Holder Patterns
CrystalClear identified a significant cluster of short-term holder price distribution between $25,000 and $31,000. This pattern reminds us of those seen during previous bear market recoveries. However, the data shows that many of these investors still hold positions at a loss, leading to short-term selling pressure.
The firm also noted a significant decline in the supply from short-term holders, reaching a multi-year low of 2.56 million BTC. On the other hand, long-term holders have a record high of 14.6 million BTC.
If only 10% of the 1.77 million BTC held by long-term investors at prices above $47,000 change their positions before Bitcoin reaches $40,000, this equates to roughly 6.5 months of the current mining yield. This highlights the potential influence of a global economic downturn on Bitcoin’s value, especially with the dwindling numbers of short-term holders.
This observation doesn’t negate the idea of “long-term conviction investors” increasing their holdings. But no historical data accounts for the recent spikes in the U.S. 10-year Treasury yields or the 30-year average mortgage rate nearing 7%.
Despite the current trend, long-term holders might change their decisions in the face of adverse economic conditions. Higher yields in equities could attract more investors, leading to potential market fluctuations. At the same time, governments and corporations might face challenges with rising borrowing costs, impacting budgets and profit margins. Such scenarios might push central banks to adopt fiscal measures to stimulate economic activity, leading to inflationary pressures.
Considering Bitcoin became a $50 billion asset class just six years ago, it remains uncertain how holders will react to challenges in traditional markets. This situation contrasts with the historically low volatility in markets like the S&P 500, oil, and Bitcoin. This raises a question: Does this calm precede a storm, and will Bitcoin act as a safeguard against rising inflation? Only time will tell. Read more about market volatility.
This post is for informational purposes only and should not be considered as financial or legal advice. The opinions expressed belong solely to the author and do not represent any other entity.