Bitcoin, Ether Hover Below Key Levels While Volatility Dips
Traders tend to take less risky moves when volatility is low because price risk is down, analysts said
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Crypto traded sideways Thursday morning in New York after a sharp sell-off Wednesday, but continued low liquidity and volatility has traders scratching their heads.
Bitcoin (BTC) was flat at time of publication, hovering around $28,790 while ether (ETH) rallied around 2% to just below $2,000.
Wednesday’s drop, which traders largely attribute to a 16,000 BTC sell order on Binance, hardly nudged bitcoin’s 30-day volatility, which currently sits close to 40%, data from Glassnode showed.
“Intriguingly, volatility did not spike as it usually does with similar drops — BTC’s 30-day realized volatility has been dropping sharply over the past couple of weeks, and is now around mid-January levels,” Noelle Acheson, author of Crypto is Macro Now and former head of market insights at Genesis, wrote in a note Thursday.
Traders tend to take less risky moves when volatility is low because price risk is down, Acheson said.
“Markets like company, and until volumes pick up enough to move the volatility needle, or volatility picks up enough to bring in more volume, we are likely to continue to see range-bound trading followed by head-scratching moves,” Acheson said.
Similarly, equities are experiencing a period of low volatility, with the VIX down by close to 3.5% over the past five trading days. The CBOE Volatility Index (VIX) was around 17.3 at time of publication. Values below 20 tend to signal more stable times in the market.
“The VIX is trading at the lowest levels since the S&P 500 hit its standing all-time high in the early days of 2022,” Tom Essaye, founder of Sevens Report Research, said.
The S&P 500 and Nasdaq Composite Indexes, like crypto, were trading fairly flat Thursday morning, each down less than 0.5%. Even so, Essaye said, traders are not in the clear just yet.
“It will be hard to believe the market is poised to casually cruise towards new record highs from here,” he added. “I.e., the bottom of the bear market is not in.”
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