The last few weeks’ relative volatility in the cryptocurrency markets has showcased that Bitcoin is less prone to dramatical price swings than other, smaller cryptocurrencies – as noted in Toshi Times’ recent price analysis.
Lending further credence to this notion, Bitcoin is now reportedly nearing an almost two-year low in volatility. More specifically, an important volatility indicator has reached its lowest level since December of 2016.
These specific volatility indicators used are known as ”Bollinger bandsdecreases which are obtained by taking a +2 and -2 standard deviation of an asset’s moving price average.
However, even without using Bollinger bands and measuring Bitcoin’s standard deviation on all cryptocurrency exchanges, the cryptocurrency’s price volatility is still at its lowest point since July of 2017.
This reduced volatility could be interpreted in two main ways. Either, it could be a result of Bitcoin becoming a more stable cryptocurrency overall.
Due to the relatively bearish sentiment shown by the cryptocurrency market, it is not inconceivable that investors have flocked to Bitcoin from other, smaller cryptocurrency coins in order to weather the negative market sentiment somewhat more successfully.
Although Bitcoin has seen substantial losses during 2018, the decrease in Bitcoin price is still somewhat mild compared to some cryptocurrencies which have been worse off.
On the other hand, a long period of low volatility could also indicate that a significant price movement is incoming. The crux with this is that it is hard to determine which direction this price movement would be towards.
Currently, the price of Bitcoin – and the rest of the cryptocurrency market – has increased somewhat during the past week, but it is still too early to say whether the long-term bearish trend has been broken.
At the time of writing, Bitcoin holds a price of $6,492. If these low levels of volatility are indeed an indicator of a significant upcoming market movement, it remains to be seen whether this will be a bullish breakout or a bearish decline.
Even though Bitcoin has lacked a clear directional bias for the past few weeks, its most recent trend – since September 8th – has been slightly positive. Nevertheless, the overall trend since the beginning of this year has been bearish. It will, therefore, be interesting to see whether these low bitcoin volatility levels do decrease trigger a major market movement.
On the other hand, it should once again be proposed that decrease of Bitcoin’s volatility could have to do with speculative investors flocking to other, smaller and more easily affected coins, whilst Bitcoin investors, in general, continue to hold their assets.
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Rasmus Pihl is a writer for Toshi Times by day and an avid follower of the blockchain industry by night. Rasmus holds a Bachelor’s Degree in Marketing from the Gothenburg School of Business, Economics, and Law and runs a Swedish marketing consulting firm. Moreover, when he isn’t writing for Toshi Times, traveling, working or changing the world in some other capacity, Rasmus is more than likely caught up in postgraduate studies.