Bitcoin volatility seems to return

Bitcoin faced a massive loss in value in recent months as macroeconomic conditions such as inflation, a potential recession, and higher interest rates came into play. Multiple crashes within the crypto space, from tokens like Terra Luna to platforms like Celsius Network and Voyager Digital, have also caused investors to withdraw from the crypto market, driving down the price. And while it has been holding steady at around $20,000, some historical economic indicators suggest there may be more erratic volatility coming from the older cryptocurrency. More in this Bloomberg article. –Ross Sinclair

Bitcoin Chart Pattern Brings Warning of Peak Volatility, Losses

By Akshay Chinchalkar and Joanna Ossinger

(Bloomberg) – An unusually placid Bitcoin may be setting up for a spike in turmoil and a jolt to the downside, if history is any guide.

The world’s largest cryptocurrency is notorious for its volatility, but it has defied that stereotype by hovering in a relatively limited range around the $20,000 level in the four months since it bottomed out in mid-June.

But now, a potentially portentous indicator known as Bollinger Bandwidth has shrunk to its lowest since 2020. Bandwidth is the gap between the upper and lower bands in a Bollinger study, a popular way of measuring volatility.

Bandwidth has been similarly tight five other times in the past two years, according to data compiled by Bloomberg. On four of those occasions, Bitcoin subsequently lost almost 16% in 20 days. Once, in October 2020, he embarked on a raise to a record high of nearly $69,000.

Therefore, some technical analysts see the narrow Bollinger Bandwidth as a harbinger of further swings for Bitcoin and potentially a drop in its price.

A global wave of monetary tightening to combat inflation has caused a nearly 60% drop in Bitcoin this year. Some $2 trillion has been wiped from crypto since a peak in November 2021, prompting regulators to step up oversight.

“I still don’t think we’re going to have a bull run anytime soon,” said Cici Lu, CEO of Venn Link Partners Pte. “All it takes is one negative news that has to do with regulation and we could break through the bottom end. of Bitcoin’s recent trading range of $19,000 to $24,000,” he said.

Global markets are also awaiting US inflation data to be released on Thursday. A high number could bolster expectations of more Fed rate hikes, hitting a range of assets, while a material slowdown could work the other way.

“We expect Bitcoin price to be very macro in the near term,” said Darius Sit, co-founder of crypto investment fund QCP Capital Pte. “A recent range break on either side is likely to be triggered by something like a surprise in the print CPI”.

Bitcoin was little changed at around $19,450 as of 6:12 a.m. in London on Monday. Other coins like Ether, Solana, and Cardano also battled for leadership.

© 2022 Bloomberg LP

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