Bitcoin has always been a volatile and changeable asset, and this was borne out clearly during its historic price run back in 2017.
During these 12 incredible months, the price of Bitcoin soared from just $1,000 to a staggering $20,000 on the CoinDesk Index, before paring back to £8,000 by June 2018. This highlights both the opportunities and the challenges facing Bitcoin traders in the modern age, and there’s no sign of this market becoming less volatile in the near-term.
In this post, we’ll cast our eyes over the latest Bitcoin price movements, while asking whether or not there could be turmoil on the horizon for this fascinating asset class.
How has Bitcon Performed of Late?
Interestingly, Bitcoin has enjoyed something of a surge of late, against the backdrop of a weakening US dollar and a pronounced climb in retail interest.
The decline of the dollar comes as the Fed prepares a $2 trillion stimulus package to deal with the coronavirus outbreak, which would cap base interest rates and send currency values tumbling.
According to Edward Moya from Oanda, Barstool Sports founder-turned vocal day trader Dave Portnoy has recently embraced crypto tokens such as Bitcoin and blazed a trail for other new traders to follow in the near-term.
These factors have led to a sustained increase in Bitcoin value, which recently cleared the $12,000 barrier and may boast enough momentum to retest the reported 2019 high of $13,851.
Is Bitcoin Poised for a Collapse?
While the recent outlook for Bitcoin has been largely positive, however, some exports are predicting a short-term crash at some point in December.
This hints at potentially dark times ahead for investors, although there’s no immediate suggestion that this decline will extend indefinitely and beyond Q4 of 2020.
According to the trusted US crypto exchange Kraken and its August 2020 volatility report, the price of Bitcoin is primed for a crash and an incredibly negative level of performance in September.
What’s more, this period of marked decline could ultimately be followed by a state of extreme volatility, with historical trends and market dynamics playing a pivotal role in such trends.
From a historical perspective, September has always been Bitcoin’s worst performing months, with an average return of -7% during this period. This could plunge further this month, with the asset having typically underperformed in relation to its average monthly returns for most of 2020.
We’ve also seen that Bitcoin’s annualised volatility has bottomed out between 15% and 30% on at least 12 different occasions in the past, before climbing to +140% on average over 94 days.
As of the end of August 2020, 38 days are thought to have passed since the volatility low of 23% recorded on July 24th, and in this respect, the value of Bitcoin could be poised for a significant trough and then peak in the coming months.
This is definitely something that investors must keep in mind during the next quarter at least, although the relative liquidity of Bitcoin should offer an opportunity for investors to sell if they wish.