A Non-Volatile Bitcoin? What will they think of next?

  • Bitcoin volatility at lowest point since the beginning of this year
  • Some are using the diminished volatility in the cryptocurrency as a buying opportunity in anticipation of higher prices 
Students of cryptocurrencies will know that stories of volatility are often over exaggerated. For months, cryptocurrencies can trade flat, not moving very much, and then almost overnight, they can take big swings in either direction.
It’s not so much volatility as it is schizophrenia and a lull in Bitcoin’s wild swings in recent days has been seen by some investors as a tentative sign that the cryptocurrency could tend higher.
Following two straight sessions of gains, Bitcoin was relatively flat at around US$36,500 and swings in price (measured by the spread between the daily high and low) have fallen to their lowest levels since the beginning of this year.
Tom Lee, co-founder of independent research firm Fundstrat Global Advisors who was once ridiculed for predicting that Bitcoin would go to US$25,000 (who’s laughing now?) wrote in a note to clients,
“Despite another set of ‘negative headlines’ Bitcoin actually rose $2,000 over the weekend. I can’t help but view this as reinforcing the likelihood Bitcoin has bottomed, given bad news is not creating new lows.”
To be fair, the news wasn’t necessarily “bad” per se.
Over the weekend, U.S. financial authorities revealed that they were preparing to take a more active role in regulating the cryptocurrency market, a move which ought to have been welcome as many parts of the industry have been calling for greater regulation for years.
Regulation also paves the way for a possible U.S. Bitcoin ETF, that would necessarily be bullish for Bitcoin as it sucks in fund flows.
Undeterred by his earlier US$25,000 Bitcoin prediction, Funstrat’s Lee is now suggesting that Bitcoin will likely exceed US$125,000 by the end of the year, but is watching for any rise above US$40,000 as a sign that the cryptocurrency has bottomed out for this year.
That could however be challenging.
Miners in China who are looking to decamp from the Middle Kingdom to setup shop again elsewhere are using the US$40,000 level as a sell signal, with strong sell-side pressure at those levels as that posts sufficient profit for them to cash out in preparation for a move.
Any push beyond US$40,000 would need to be meaningful and sustained for over a week for signs that the selling pressure at those levels may have eased and miners that are looking to move have cashed out. 

Novum Digital Asset Alpha is a digital asset quantitative trading firm.

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