Possible Increase in Bitcoin Volatility After Prolonged Period of Stability
If we consider chart patterns and the token’s history, Bitcoin could potentially be on the verge of breaking free from a period of abnormally low volatility.
Some measures of how much the biggest digital asset fluctuated fell toward record lows last month, when Bitcoin was around $30,000. The lull coincided with the cooling of the brand’s 2023 rebound from last year’s rout. Year-to-date, the gain is 80%, down from 90% through mid-July.
Potential catalysts for the breakout include pending filings by companies such as BlackRock Inc. to set up the first Bitcoin exchange-traded funds in the United States, which could boost demand. On the other hand, investors are still wary of the risks of the 2022 crypto-romance. Recently, the spotlight has been on the health of the Huobi exchange, which is connected to crypto mogul Justin Sun.
“The impending ETF ruling could disrupt the market’s recent slow phase,” Bendik Schei and Vetle Lunde of K33 Research wrote in a note, with Aug. 13 as one of the deadlines for the Securities and Exchange Commission’s response to ARK Investment. Management LLC application. “Whether the SEC delays, rejects, or approves ARK’s application could ignite volatility in the market.”
Bitcoin fell about 1 percent to $29,725 at 8:05 a.m. in London on Wednesday. Smaller cryptocurrencies such as Ether and Cardano also struggled to gain traction. The key charts below provide clues about Bitcoin’s volatility outlook.
Repeat the pattern
Bitcoin has traced a descending wedge – a narrowing Price Range – that resembles the pattern that predicted the June rally. A falling wedge is often considered bullish by chart analysts. A break of the upper line of the pattern would strengthen their conviction.
“We moved into a positive bias in Bitcoin,” IG Australia Pty market analyst Tony Sycamore wrote in a note, adding technical indicators that point to a possible push towards $34,000.
Rare Stretch
Bitcoin’s 30-day historical volatility is near the 20 handle after a sharp drop. The measure has been 20 or less just 2% of the time over the past decade, according to a Bloomberg News analysis. Instances of a pullback below 20 and then a rally back above it are even rarer: they occurred seven times in the last 10 years, and Bitcoin gained an average of 16% over the next 30 days.
“Bitcoin is seriously underpriced given its asymmetric rise and the influx of cash” into US spot ETFs for the token, Terrence Yang, CEO of Swan Bitcoin, said on Bloomberg Television.
Ties that bind
The short-term correlation between tech stocks Nasdaq 100 and Bitcoin has turned positive, indicating that the two are moving higher. This suggests that stock fluctuations may have a greater impact on the token than in recent weeks, just as investors worry about whether higher interest rates will eventually trigger a recession that will hurt stocks.
“At the end of the day, the story is about flows,” Meltem Demirors, chief strategy officer at CoinShares, told Bloomberg Television. “Right now the currents are telling the story that investors are taking risks off the table.”
