Bitcoin Realized Volatility Falls to a Level that Last Time Led to the ‘Great Sell-off of November 2018’
Today, bitcoin is seeing some gains. After falling under $9,000 yesterday, the price of bitcoin has moved to $9,280 on Bitstamp to mark a green start of the week.
Up 2.27%, BTC/USD is trading around $9,235, with a ‘real’ trading volume rising to just over $1 billion.
Interestingly, the bitcoin future curve remained in contango (higher than the spot price) though they all remained under $9,500.
The latest dip on the weekend, however, was amidst an ongoing lull in trading activity with implied volatility, also declining to its record levels.
“The implied volatility for short-dated options is considerably lower than far dated options – the options market is pricing little activity in the near term still,” said Denis Vinokourov of Bequant.
The realized volatility of the past ten days is currently at 20%. The last time we reached that level, bitcoin had the “great sell-off of November 2018 shortly after,” noted Skew. The Nov. crash took BTC from $6k to the bottom of $3,200 in December.
The mining industry isn’t doing any good either, given that the miner revenue declined 23% during June. Bitcoin miners generated a revenue of about $280 million, down from $365 million in May, due to the block reward halving and lower network fees.
Back in May, when the BTC subsidy per block dropped to 6.25 BTC, it was still 12.5 BTC in the first 11 days. Also, unconfirmed transactions in mempool remained high, which caused transaction fees to increase.
In June, the mempool cleared, transaction fees went to normal levels, and the block subsidy was 6.25 BTC throughout the month, proving a clear picture of what it's going to be after halving.
Global Stock Market Rallying
Amidst all this, global stock markets continue to surge. S&P 500 headed to its fifth-straight increase with 1.4% at 3,172, and Dow rose 1.4%. Nasdaq meanwhile advanced 1.5% to a record intraday high at 10,369.
Alicia Levine, the chief strategist at BNY Mellon Investment Management, told Bloomberg that they are advising their clients to stay in the market amidst stimulus from the Federal Reserve and US government.
“That is still our message,” Levine said. “It’s extraordinary. I think we’re all scratching our heads, but the market is telling me you’ve got to be in it.”
It Just Takes a Headline
Today’s pump meanwhile was led by a rally in Chinese shares, which pushed aa global equity benchmark to a one-month high.
Chinese stock market jumped after China’s Securities Times on Monday, “encouraged investors to pile into the market and reap the benefits of a post-coronavirus economic boom,” reported FT.
A front-page editorial titled “Hahahahaha! The signs of a bull market are more and more clear,” in state media was enough to rope in people.
This was speculated to be an attempt by Chinese authorities to push up prices to boost consumer spending for a broader economic recovery. The current market boom, however, is rekindling the memories of 2015 when state media cheered the stock prices doubling, which later collapsed 40%.
Here’s the Hopium for Bitcoiners…
Already, bitcoin has outperformed other assets in the Q2 2020 with 42.2% returns in comparison to Nasdaq’s 30%, S&P 500’s 20%, and gold’s 12.9% quarterly return. And bitcoin hasn’t broken the $10,000 mark yet.
The good thing for bitcoin is that its correlation with the S&P 500 remains at all-time highs, and today bitcoin is also moving though just a little.
“With external markets surging, Bitcoin traders may be looking to ride the trend and not remain overly bearish on the price of BTC,” wrote OKEx Insights.
And if you are looking for hopium…
— PlanB 🔴 (@100trillionUSD) July 6, 2020
Moreover, not only the leading cryptocurrency not showing a real selling pressure on the daily chart but also has a bullish divergence on the hourly RSI indicator.