Declining Bitcoin Volatility Indicates “Consolidating Bull Market”
Bitcoin is back against a key inflection point following a swift rally over the past week. Currently, hovering around $7,700 after printing a fresh, multi-high yesterday.
While BTC/USD has recovered to pre-crash levels, US oil prices are still plunging amidst the excess supply of crude at a time when there is no demand for it. The latest crash came as the USO ETF said it would dump its June contracts this week and reduce contracts for other upcoming months to focus on buying long-term oil contracts.
As such, Bond King Jeffrey Gundlach is of the camp that believes, “we are not out of the woods. … I think a retest of the low is very plausible.” He shorted S&P 500 because,
“People don’t understand the magnitude of the social unease that’s going to happen. We’ve lost every single job that we created since the bottom in 2009.”
With the money printer going brrr…
Currently, the equities market is only 16% off its all-time high, and “When those who are in charge of creating the money are buying, it's kind of hard for prices to fall,” said analyst Mati Greenspan.
Just yesterday, the Bank of Japan ramped up its stimulus with a promise of unlimited bond-buying aimed at preventing its economy from causing a coronavirus-triggered collapse.
With the money printing going on, it is possible we would “bust through the top and zoom toward the next point of resistance, possibly near $10,000,” or it is also “entirely possible that we're now in a temporary bull trap, and we may test $7,000 to the downside again. In fact, this would be well within the current upward-facing channel,” wrote Greenspan in his daily newsletter Quantum Economics.
A 260-day volatility measure of Bitcoin meanwhile has come down to a record low versus the S&P 500 which indicates a price appreciation tilt towards the digital asset.
“Bitcoin volatility in decline is indicative of maturation and a consolidating bull market,” wrote Bloomberg Intelligence’s Mike McGlone.
“The original cryptocurrency appears to have weathered the financial-market storm and is on sounder footing on the back of a price decline into good support with indications of increasing adoption.”
Long-term Bitcoin undervalued
Meanwhile, the crypto market is preparing for the upcoming halving which can act as a positive catalyst for prices. Don Wyper, COO at DigitalMint said,
“There are so many moving parts to the Bitcoin economy that some potential effects from the halving are likely not fully baked into the price of Bitcoin at this moment.”
Based on bitcoin’s past performance, he expects the price to “skyrocket” as such long-term Bitcoin is undervalued with increased volatility expected in the short-term.
At its current level, bitcoin is holding strong but that fact that $7,800 level can’t take too many more hits and most dips got bought up quickly, “the risk on appetite is still ripe.”
#Bitcoin price reaches $7,700
Using our IOMAP indicator , we see that there are close to 1.5mm addresses that could push back on Bitcoin getting passed $8,000. Looking at the levels of support, $7500 looks like it could hold strong with 1.17mm addresses holding almost 830k #BTC. pic.twitter.com/b2TN0ruiCe
— intotheblock (@intotheblock) April 27, 2020
However, as per the futures market which is in backwardation, we are “positioning for more downside” both in the long and short term.