Bitcoin Volatility Drops Below that of Nasdaq, S&P500, and Gold, What’s Ahead?

Bitcoin’s volatility is at a 5-year low with K33 research analyst predicting that the period of low volatility could be ending soon amid pure structural squeezes.

The world’s largest cryptocurrency Bitcoin (BTC) has been hovering around $29,000 over the past few weeks with almost little to no movements. As per crypto research firm K33, the 5-day volatility of Bitcoin has dropped below that of other traditional assets such as Nasdaq, S&P 500, and Gold.

In a research report published today, K33 stated that Bitcoin’s 30-day volatility currently sits near five-year lows. Previously, BTC displayed this low volatility since January 2019. The firm noted that historically when Bitcoin’s volatility reduces, it is often followed by periods of high volatility. This indicates that the current period of low volatility may soon end, and there could be more significant price swings in the future. In their current research report, K33 senior analyst Vetle Lunde noted:

“My short-term thesis is that the market’s volatility pressure is about to climax and that an eruption is near. The tricky job is to build an informed view of when the pressure gets too strong.”

Lunde also added that one way to re-ignite the BTC price movement would be to trigger the Bitcoin trading volumes. However, he adds that pure structural squeezes usually lead to further price actions.

Catalysts for Further Bitcoin Price Action after Current Low Volatility

According to Lunde, there are some events and catalysts on the horizon that could cause Bitcoin’s value to change a lot in the next few weeks and months. These include responses from the United States Securities and Exchange Commission (SEC) regarding bitcoin exchange-traded fund (ETF) filings from Ark 21Shares, BlackRock, and other companies. These developments might lead to increased volatility in the Bitcoin market. The analyst added:

“I expect postponements of all active filings, at least until the ongoing Grayscale vs. SEC lawsuit reach its conclusion. Thus, I expect the volatility impact of these events to be less potent for the market. Nonetheless, I favor holding significant exposure in BTC and accumulating more aggressively throughout the summer in case of an earlier-than expected verdict.”

However, Lunde also points out some negative developments recently, especially the current exploit of decentralized exchange Curve Finance and the liquidation risk following thereafter. “These liquidations could have dramatic negative spill-over effects on the market, pushing volatility higher,” Lunde said. “These events are hard to predict in advance. Similarly, the Grayscale vs SEC hearing verdict could occur any time in the coming months, representing a further potential volatility catalyst for the market.”

Overall, the K33 analyst is bullish on Bitcoin as we approach 2024. Analysts are eagerly awaiting the Bitcoin halving event scheduled in mid-2024. This could be a major bullish trigger for BTC going ahead.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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