Risk aversion has caused Bitcoin to drop to a level that is below where it was over two months ago.
In today’s trade, the largest digital asset by market value fell as much as 3.1%, reaching a low of $28,230. The drop was the biggest in a single day since August 1. At the time of writing, BTC has dropped 2.50% to $28,399 over the previous day.
According to Glassnode, the Bitcoin market has reached a point of severe indifference and tiredness, with volatility measures and several other on-chain indicators reaching all-time lows.
Volatility is a key risk indicator for cryptocurrency markets because it measures how much an asset’s price fluctuates over time.
Given that volatility indicators are at record lows, Bloomberg Senior Macro Strategist Mike McGlone assesses the likelihood of a significant increase in the price of Bitcoin.
According to McGlone, the 180-day volatility for Bitcoin plummeted to roughly 46% on August 16 – the lowest ever — according to a brief message put in a graphical representation. Along with the declining volatility for both asset classes, he points out that since the end of Q1, Bitcoin has displayed diverging weakness vs the stock index.
McGlone pointed out that if the S&P 500 falls, Bitcoin volatility may increase in light of this. According to the strategist, market volatility often increases when the S&P 500 declines.
Although the acceptance of Bitcoin as digital gold is now the trend, relative crypto risk or volatility still has opportunity to decrease given that it is currently around three times as volatile as the metal. McGlone said that Bitcoin traded in 2018 at a risk that was around ten times greater than that of gold, indicating the cryptocurrency’s development over time.
Choppy, sideways market ahead?
The market’s present low volatility is frequently accompanied with a sparse inflow of demand. The Realised Cap, according to Glassnode, is only very slightly rising, indicating that a very monotonous, choppy, sideways market may continue in the near future.
On the other hand, relatively few Bitcoin investors appear to be willing to sell their holdings, suggesting that investor conviction appears to remain extremely strong.
This is happening as the supply held by long-term holders keeps growing and reaches an all-time high of 14.6 million BTC. The supply of short-term holders, in contrast, has fallen to a multi-year low of 2.56 million BTC.
