- The compression of Bitcoin’s volatility indicates that a significant range expansion is about to occur.
As of June 3rd, the price of Bitcoin BTC tickers at $58,821 was 20% below its all-time high of $73,835. The market’s prevailing lethargy and weariness are reflected in the price action right now, but onchain measures suggest that Bitcoin is getting ready for a bigger rise soon, as per a Glassnode study.
The profitability of bitcoin investors is still incredibly strong
The price of the leading cryptocurrency, bitcoin, has seen an amazing run in 2024, surpassing its all-time high on March 5. Since then, there has been a correction in Bitcoin, with three drops below the $60,000 mark in the last 10 days, causing panic and gloomy sentiments to take hold while apathy took over.
According to market research firm Glassnode, despite this, a sizable fraction of Bitcoin investors continue to make money using the Market Value Realized Value (MVRV) metric.
The typical coin still has a two-time profit multiple, as seen in the figure below, indicating that overall investor profitability is still very strong.
According to Glassnode, the rise in Bitcoin’s value between $60,000 and $70,000 since March has resulted in a general lack of direction and a market that hasn’t shown a strong trend.
The data aggregator indicates an eager bull market when the spot price oscillates between the all-time high and the True Market Mean. The True Market Mean, or average cost basis per active investor, is valued at $50,000, as shown in the chart below.
According to Glassnode, $50,000 is a crucial price level that Bitcoin’s price needs to stay above in order for the overall bull market to continue.
According to a recent analysis by 10X Research, Bitcoin will drop quickly to lower support levels and might even hit $50,000 if it fails to stay above $60,000.
A decline in volatility indicates “big market moves ahead.”
Following several months of range-bound trading, analysts at Glassnode saw a decrease in volatility throughout a number of time periods. The Realized Volatility of Bitcoin shows a negative 30-day change across the 1-week, 2-week, 1-month, 3-month, 6-month, and 1-year timeframes.
According to the paper, when this occurs, a signal is set off that suggests that both volatility and market expectations of future lower volatility are contracting.
A period of declining historical volatility or fluctuation in the performance of the price of Bitcoin is known as volatility compression. It is frequently followed by a major change in the market, either positive or negative.
In addition, Gassnode evaluated the percentage difference between the highest and lowest price ticks over the last 60 days and discovered that the volatility of the Bitcoin market is still “compressing to levels rarely seen.”
When such long consolidations are followed by this compression, it typically indicates that the price is getting ready for significant market movements.
In terms of the Sell-Side Risk Ratio, the researchers determined that the Realized Cap—the total realized profit and loss locked in by investors relative to the size of the asset—has shrunk to all-time lows.
This indicates that the present trading range is nearing the end of its evolution towards the upcoming range expansion.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
