Volatility, an iconic feature of Bitcoin, seems to be seeing unusual days. The crypto-asset known for its erratic movements is currently showing lower volatility than even the S&P 500, technology stocks and even gold. A surprising phenomenon, but what is it really hiding? Could this be the calm before the storm?
Historically Low Volatility
Volatility has always been a salient feature of Bitcoin. However, this volatility is not static and experiences significant variations. The current period, marked by historically low volatility, is a decisive break with the patterns to which market participants have become accustomed.
According to the figures gathered by Bloomberg, Bitcoin has lined up eight consecutive trading sessions without fluctuation of more than 1%, a sequence not seen since the beginning of the year. We have to go back to October 2018 to find a similar period. This singular fact testifies to an ongoing evolution within the Bitcoin ecosystem.
A new paradigm of stability!
The question that plagues many observers is: why this sudden lull? In-depth analysis points to low trading activity in the markets.
July saw exceptionally low trading volumes for Bitcoin. The analyst of K33, Bendik Schei, describes this current stability as a “rare achievement”. According to him, there is no doubt that traders have momentarily deserted Bitcoin.
“The market is clearly in an unprecedented phase of stability, which usually acts as a massive pressure valve for volatility when it finally comes back to life”
A similar observation was shared by The Block. According to their data, exchanges recorded a total spot trading volume of $439 billion in May 2023, down nearly 90% from $4.25 trillion two years ago.
Anticipating the Inevitable: An Eruption to Come?
Despite this apparent stability, it is crucial to keep in mind that Bitcoin is unpredictable. Periods of dead calm have often been the prelude to sudden and substantial movements. While history has shown a correlation between falling volatility and major swings to come, one question remains: is this lull really the truce before the storm?
Explanatory factors can be diverse. A major announcement could easily trigger a new bout of volatility. Some point to the impact of BlackRock and the Bitcoin spot ETF dissipating. Still others point to Bitcoin’s influence in the political arena, particularly in the race for the presidency in the United States. The repercussions of these events may well affect the trajectory of Bitcoin.
In sum, Bitcoin, despite its reputation as a volatile asset, is currently going through a period of unusual stability. However, history reminds us that periods of quiet can often give way to surprising turbulence. As investors carefully scrutinize upcoming events, the market is holding its breath, perhaps bracing for a rash of volatility that could significantly reshape the crypto landscape.
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