Bitcoin: Is the return of volatility inevitable?

Bitcoin: Is the return of volatility inevitable?


The summary of Glassnode’s weekly On-Chain analytical report states that, in general, the analytical company expects volatility to return in light of the “fragmentation of the consolidation channel and a decrease in volatility.”

The change in the BTC/USD 30-day moving average during trading hours in the USA, Europe and Asia shows on which continent purchases or sales are taking place. This metric says that buyers are mainly located in the USA and Europe. Most of the selling pressure comes from Asian watches.

Currently, it is noted that the BTC is more supported by Europe, although bullish pressure remains modest and is not yet a clear signal of the return of the bull market.

For their part, Asians continue to sell. The following diagram is very illustrative. The blue and purple curves represent the evolution of BTC/USD in American and European time, respectively. The red color represents BTC/USD in Asian time:

  • Purple Curve: 30-day moving average of BTC/USD changes during European trading hours
  • Blue Curve: 30-day moving average of BTC/USD during US business hours
  • Red Curve: 30-day Moving average of BTC/USD change in Asian hours

GN then analyzed the activity on the chain to assess the state of demand for Bitcoin (BTC). The following metrics were selected this week:

  • Number of active addresses;
  • Number of transactions;
  • Transaction volumes.

GN claims that these indicators tend to fall at the beginning of bear markets. However, they signal the resumption of an upward trend when an increase in the activity of large fish is detected.

Currently, the figures do not indicate the imminent beginning of a large bullish growth. The rate of 215,000 transactions per day is lower than during the whole of 2019. The acceleration of the number of transactions will be a constructive signal for the growth of the BTC/USD rate.

110,000 new objects (object = a group of addresses belonging to the same object) per day also indicates an upward trend, but only slightly:

Finally, the last chart shows trading volumes (in dollars). If in 2017 ATH of about $20,000 was followed by a collapse in volumes, then in 2020 volumes continued to grow, despite two drops of BTC/USD by 50%.

However, we are currently at the bottom of the ascending channel. We should not go lower, otherwise it will signal a decrease in the use of the Bitcoin network, which could potentially push BTC to decline.:

Bitcoin: Transaction volumes

(each color represents the volume by the size of the transaction. We see that 68% of the volume is made up of single transactions worth over 1 million US dollars, which indicates the arrival of “institutional”)

At the moment, Bitcoin is in the range of 40K – 45K $, and continues its quiet rise.

Rumors, rumors…

Bitcoin has been retreating since the November ATH (132 days of decline) and we are in a two-month consolidation. The activity on the chain remains at the level corresponding to the bear market, but does not imply what the next movement will be (down or up). The acceleration of activity in the network and the increase in the accumulation of BTC by long-term holders will be a “bullish” factor. And vice versa. We may be on the verge of renewed volatility.

Do not discount the fact that rumors are running one after another.

The rumor generator is running at full capacity. It is said that Honduras will be the first country to follow in the footsteps of El Salvador and make BTC a full-fledged currency. At least that’s what the hilarious Max Kaiser’s recent tweet says.

Other South American countries are considering this issue, including Mexico. Senator Indira Kempis said on March 17: “We need Bitcoin to become legal tender in Mexico.”

The domino is starting to fall, despite the fact that the IMF is putting pressure on Argentina, blackmailing it (among other conditions) by “preventing the use of cryptocurrencies” in exchange for debt restructuring. This will be difficult to implement, given that Argentines are struggling with 50% annual inflation.

Speaking of inflation, the West does not stand aside, and recent events do not inspire optimism. Fitch rating agency expects that inflation in the US will soon reach 9%. At this rate, a little more, and prices will double.

The situation is even worse in Europe, where everything is already bad, but it will be even worse. Energy prices are already going through the roof, and Russia has not even turned off the tap yet.

Sooner or later, Europe will reap the benefits of its sanctions, and will regret disconnecting Russia from the SWIFT network if it decides to completely stop supplying energy, which will lead to power outages throughout Europe.

And also, considering that 40% of the gas consumed by the EU comes from Russia, Natixis Bank predicts that the price of gas on the old continent will increase fourfold.

Since Russian oil exports account for 5% of global consumption (excluding Russia), Natixis also expects the price of a barrel to rise to almost $170 (or about 4 euros per liter of gasoline).

The EU sincerely hopes that it will not come to this, although, judging by the fact that E. Macron offers food vouchers, not to mention incentives to turn down the temperature in the thermostat, does not bode well for easing the sharp inflationary pressure that is increasing every day.

Unfortunately, the world is moving towards a long and highly inflationary conflict. Which will certainly be useful for Bitcoin.

Inflation will not subside until there is calm in the world, and every step in this direction is another justification for why Bitcoin exists.