According to the latest Glassnode Insights update, “The On-Chain Chronicle,” Bitcoin is on the verge of entering an era of remarkable stability. The asset’s fluctuation levels have dwindled to a 2.9% breach between Bitcoin’s Bollinger Bands, implying an unusually short trading period.
Glassnode revealed that such a scenario has only happened once before in the history of the leading digital asset. The first was when the price of BTC was $604 in September 2016, then in January 2023, when the asset’s value stabilized at $16,800.
Is Low-Volatility A Sign Of Bullish Trend?
According to Glassnode’s findings, when volatility decreases, and investor fatigue sets in, the value of most crypto assets shifts based on their proximity to the current price. This trend suggests that traders may experience minor gains or losses as they exit their trading positions.
The report also emphasizes the importance of defining a new price range, which may affect the asset’s anticipated volatility increase. Meanwhile, the brief period in which Bitcoin traded within a price range of $29,050 and $29,775 over the previous three weeks is an unusual occurrence that does not necessitate complex mathematical explanations.
As a result, the asset’s annualized 30-day volatility period hit an unusual low of 17%. Hence, the main question posed by analysts is whether this pattern is limited to cryptocurrencies or it’s a phenomenon that also happens in traditional markets such as stocks, oil, bonds, and forex.
Analysts referenced the 30-day volatility of the S&P 500 and West Texas Intermediate (WTI) oil prices, which currently trade at their lowest level since November 2021. Surprisingly, the US Dollar Index (DXY) has defied this trend, rising from 6% in May 2023 to 8% in the same month.
In addition, the 30-day volatility of the 10-year Treasury yield has recently rebounded from its lowest point in a year and a half, jumping from around 10% to its current level of 16%. Hence, Glassnode analysts opined that these intriguing dynamics could have influenced the decline in Bitcoin’s volatility.
They added that a notable band of price distribution among short-term holders could be found when BTC traded in the $25,000 to $31,000 range. This pattern resembles similar phases seen in previous bear market reversals.
Nonetheless, the data highlights a crucial point; many of these investors have continued to hold positions where they have experienced losses, contributing to short-term selling pressure.
Are Short-Term BTC Holders Decreasing?
In a moderately optimistic scenario in which only 10% of the 1.77 million BTC owned by long-term investors who purchased their BTC at $47,000 or higher decide to sell before Bitcoin reaches the $40,000 mark, this might equate to approximately six and a half months’ worth of BTC output by miners. Beyond the observation that short-term Bitcoin holders are reducing gradually, this scenario effectively acknowledges the potential outcomes of a global economic downturn on Bitcoin’s valuation.
While this does not nullify Glassnode’s concept of “long-term conviction holders” increasing their holdings if this scenario happens, it is critical to note that historical records cannot fully account for developments such as US 10-year Treasure yields in 16 years.
Meanwhile, Bitcoin has only spent six years as a $50 billion asset. Hence, it is almost improbable to determine its holders’ reaction to the pressures from some segments of the traditional markets, notably treasury yields and mortgage markets.
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