- Bitcoin volatility is about to increase, says Glassnode report.
- The flagship crypto could follow precious metals, which are trending up.
- Long-term holders could determine the next move, as they historically hold a significant role in BTC fluctuations.
YEREVAN (CoinChapter.com) – On May 29, crypto analytical platform Glassnode published a report stating that the tentative state of “equilibrium” in the crypto market, particularly Bitcoin, is about to end. Here are the main reasons behind the assumption.
#1 Bitcoin traded in unison with precious metals
Bitcoin and precious metals have responded positively to the uptick of liquidity in the market since October 2022. In detail, BTC rallied over 65% year-to-date, reaching $31,000 on April 14 and gradually declining to $27,700 on May 30.
Simultaneously, gold spot price rallied near its all-time highs and peaked at $2,050 per ounce on May 4, dropping to $1,960 by May 30. Spot Silver’s price peaked in early May and stood at $23 per ounce as of writing.
The report also stated that the FTX debacle in Nov 2022 hurt the crypto market while commodities like precious metals continued to rise. However, a tighter correlation could be observed roughly since March 2023.
As precious metals historically do well in times of crisis, Bitcoin is likely to follow their pattern, exhibiting more volatility.
#2 Bitcoin volatility at lows – rise ahead
According to Glassnode, the Monthly Realized Volatility has dropped to 34.1% as momentum slowed down in the Bitcoin market. In detail, Realized volatility is sometimes referred to as historical since it measures past volatility.
Historically, such low-volatility regimes only account for 19.3% of market history, and therefore expectations of elevated volatility on the near-term horizon is a logical conclusion.
The decline in volatility could be attributed to a drop in on-chain transfer volumes, which translates into a decline in exchange activity.
#3 Holders’ psychology plays a significant role in Bitcoin volatility
Glassnode researchers utilized a set of investor cost basis to find the likely boundaries of near-term volatility. “The goal is to find price levels which are likely to elicit a significant psychological response from a larger proportion of holders,” explained the report.
The Active Investor Cost Basis is currently trading at $33.5k, which accounts only for investors actively participating in the market. With the Active Investor MVRV at 0.83, it suggests that many 2021-22 cycle buyers are still underwater and may be waiting for break-even prices to liquidate their holdings.
Also, researchers noted the “resilience” Bitcoin long-term holders (LTH) have exhibited during extreme volatility.
As the holding regime was in place year-to-date, a spending phase might follow next if the past is any indication. Finally, the possible selling phase would spike Bitcoin volatility, stirring the tentative “equilibrium.”
We can see that LTH spending was been extremely light over recent weeks but has ticked higher during this correction. The Indicator reached a level suggesting 4-of-7 days experienced a net divestment by LTHs, which is a level similar to exit liquidity events seen YTD.
read the report.
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