Bitcoin Analysts and Traders Say BTC’s Low Volatility Is ‘Calm Before the Storm’

If you were to hang around crypto traders this week, you would have heard three phrases repeatedly muttered: “volatility”, “bond prices” and the potential for a “sharp move” in the Bitcoin BTC price.

Several analysts have emphasized Bitcoin’s range-bound price action, leading some to question whether this is a sign of a market bottom, or even a decoupling from the stock markets.

In their latest “The Week On-chain” newsletter, titled “A Calm Before The Storm,” Glassnode analysts said:

“In recent weeks, there has been an uncharacteristically low level of volatility in Bitcoin prices, in stark contrast to the equity, credit and currency markets, where central bank rate hikes, inflation and a strong US dollar continue to wreak havoc.”

Research outlet Delphi Digital also weighed in on the topic, pointing to the Bollinger Band Width Percentile (BBWP) calculation as evidence that there could be “a big move coming for BTC.” According to Delphi Digital, “Historically, BBWP readings above 90 or below 5 have marked major turning points.”

BBWP has yet to dip below 5, but the researchers noted that for Bitcoin:

“Since Q2 2017, BBWP readings above 90 or below 5 in the past have led to an average of 204% upside or -51% downside.”

While it is premature to conclude that BTC has broken its correlation with the stock markets or even reached a market bottom, historical data suggests that long bouts of sideways price action have marked accumulation and distribution phases.

Related: The Bitcoin price finally made a move and fireworks are sure to follow

Glassnode’s Accumulation Trend Score, a metric that “reflects the aggregate balance change intensity of active investors over the past 30 days,” is currently in a neutral zone indicating a state of equilibrium in Bitcoin’s accumulation structure.

The report details how entities with 1,000 BTC to 10,000 BTC from 2018 to 2019 tended to distribute their tokens as the bull market picked up pace, while retail investors (less than 1 BTC) increased their Bitcoin allocation.

Similar investor behavior can be observed in 2022 when units with more than 10,000 BTC sold to the bear market rise to $24,500 before switching to an accumulation mode at the next lowest price.

As shown in the chart below, BTC holders with larger balances (greater than 10,000 BTC) are now neutral, while the 1,000 to 10,000 BTC cohort is accumulating. Meanwhile, retail investors show varying degrees of equilibrium and selling.

Where is the volatility?

Bitcoin price has been trading in the $18,500-$24,500 range for the past 120 days, and as noted by Cointelegraph on October 11, several factors may be responsible for the lack of fireworks.

A number of key economic events are set to take place over the next two weeks, and these could help make traders want to sit on their hands and watch from the sidelines.

The following events will take place in October:

• October 12: Minutes of the Federal Open Market Committee (FOMC).
• 12 October: Report for the consumer price index (CPI).
• October 17: Q3 results season begins
• 28 October: Price index for personal consumption expenditure (PCE).

Apart from a small rally in the Dow and S&P 500, equity markets continue to trend down, and an uptick in the conflict between Russia and Ukraine, plus the strength of the US dollar, could also contribute to investors’ aversion to risk assets. .

By analyzing the distribution of coins across long-term and short-term holders, Glassnode concluded that sellers are likely exhausted and that more than 31% of coins held by long-term holders are held at a loss. Compared to past market conditions, the researchers noted that:

“The market has been in this phase for 1.5 months, with a previous cycle lasting from 6 to 10 months.”

While it is impossible to predict which direction the Bitcoin price will take when volatility rises, studying chain data to decipher the actions of market participants in nearly identical market conditions can help investors decide what to do when the price starts to move.