stated that the rate of bitcoin volatility will rapidly decline as the cryptocurrency market matures.
He elaborated that an emerging asset class often observes large discrepancy in its daily price movements and volatility in volume until a strong infrastructure is developed to support its market. He said:
“This is a maturing market, so volatility should continue to decline. When you have a new market, it will be highly volatile until it establishes itself. There are more participants, more derivatives, more ways of trading, hedging, and arbitraging.”
Bitcoin price has been stably struck between $6,400 and $6,800, since August 9th. Just once, in mid-September the token managed to surpass $7,000 mark. Over this period the asset hasn’t hinted towards a solid momentum, which might be due to the lack of volume in the cryptocurrency exchange market. The cryptocurrency exchange market recorded its lowest daily volume in over 12 months, on October 6. This has caused leading traders to sweat where the short-term trend of the market is concerned.
Earlier volatility lows
The short-term price trend of the asset is often negatively affected by the downward shift of the volume and volatility of Bitcoin. Looking at the past trend bitcoin tends to experience a dip in volume and volatility before rallying up.
In 2012, a cryptocurrency market data platform operated by technical analyst Willy Woo, Woobull produced a volatility chart that depicted that October 2013 experienced one of its lowest volatility rates. After staying put for a few months, the token flew from around $30 to $1,000, almost 30-fold increase within a two-month period.
The stability phase inspired a. accumulation phase by the investors at a low price range, which aided more investors to explore the market and acquire BTC. Garry Tan, a prominent venture capital investor, who also invested in Coinbase and a group of startups, that is more than $20 billion collectively, stated:
“The crypto winter generally makes it safer for super-long-term oriented Yale-model institutions to enter at a price that isn’t dangerous. You know what is scary? Investing and then immediately seeing an 80% drop. That is hard to recover from.”
It is unlikely the token will return back to its 30-fold growth, however if we look at the bigger picture, the stability will allow bitcoin to spread roots in the market, initiating profitability for both short-term and mid-term rallies.
Why so sad Bitcoin?
In the past three months, a range of developments happened that could and should have pushed Bitcoin into a bull run but it didn’t. The developments include, Bakkt, the regulated cryptocurrency brokerage firm formed by the collaboration of NYSE, Microsoft, and Starbucks.
Institutional investors such as Citigroup and Goldman Sachs are incubating crypto-focused custodian solutions for their respective clientele. ErisX, the first regulated multi-crypto futures market receives backing from the brokerage giant TD Ameritrade. Endowment Giants Harvard and Yale also jumped on Cryptocurrency wagon.
Though the market has reacted slowly to these developments, the inclination of these market giants towards cryptocurrency, only indicates that once Bitcoin’s volume and trading activity recovers it will enjoy the expected bull run.
The token hasn’t been able to stick to this high level of stability in a long period of time. Upon considering the current consistency it is more likely that the foremost cryptocurrency might move upward. Cryptocurrency analyst, Danny Les, stated a similar sentiments:
“Any extended period of consolidation or ranging is usually the run up to a fairly strong move. That said, opinion is mixed on whether that move is up or down. When you’re analyzing charts, generally higher highs and higher lows are the indicators of a positive move up. Lower highs are probably not the best thing to pin hopes to in expectation of a rally. However, this is Bitcoin so [it is unpredictable].”
While more that a few analysts and traders in the cryptocurrency sector do agree with les’s conclusion, the low volume of the dominant cryptocurrency and the lack of momentum on major cryptocurrencies is a cause of concern for many traders. Les added:
“Unless already comfortably in profit, a drop in volume is never something one wants to see when in a position. The overall sentiment attached to crypto probably isn’t the most positive. Bitcoin effectively nose diving since last years all-time high has created a steady wave of retail interest decline across all crypto markets.”
Bitcoin bulls have been hinted for traders and investors that this low is the most favorable time for them to accumulate the token. BTC dipped thrice below the $6,000 mark in the past nine months. However, the token managed to recover relatively quicker from the $5,900 region, leaving a very short period of time for investors who are willing to buy bitcoin at a price below the $6,000 level.
Les stated that the continuous efforts from the platforms and companies in the cryptocurrency sector to construct a better infrastructure for the digital assets to offer support the next wave of users, investors, and consumers:
“Many platforms are ignoring talk of token prices and are just quietly working in the background to fulfil their roadmap objectives. In 2019, I think will be a very interesting year for us all. Mainstream adoption of the technology will start to become apparent and investment methods into the market will become much more in line with traditional markets. The future is very bright, however there has to be a bit of darkness beforehand.”
Throughout September and October, the market has demonstrated intense seller fatigue, implying that any large further drop is not to occur in the coming weeks. BTC could stick to this low price range but the probability of going down further is quite less. It can thus be concluded that the a final shakeout could be in play prior to a major mid-term rally.
Most analysts are in agreement that the low rate of volatility observed by bitcoin for the past three months will aid in fueling the next mid-term rally.