Posted:
- Low volatility could be a good advantage for Bitcoin.
- Spot buyers seemed ready to give BTC a much-needed boost, and derivatives players weren’t left out either.
Bitcoins [BTC] Volatility has remained low over the past three months, helping King Coin consolidate between $25,000 and $26,000. Interestingly enough, BTC was back above $27,000 at the time of writing.
Read Bitcoins [BTC] Price prediction 2023-2024
This increase caused much cheer among market participants.
Do not write off BTC yet
On September 18, CryptoCon, the creator of Halving Cycles, opined that low volatility wasn’t pushing BTC completely out of bullish territory. However, he said the drop to $25,000 was similar to 2015, when Bitcoin returned to its lows.
Even with the latest price drop, #Bitcoin Three-month volatility remains extremely low.
Such low volatility has never been seen outside of bullish price activity.
So how did we get the drop from 29,000 to 25,000?
This scenario is starting to look like… pic.twitter.com/QY4RPvhe8r
— CryptoCon (@CryptoCon_) September 17, 2023
Based on the annual realized volatility, CryptoCon concluded that the decline in volatility would eventually slow down optimistic again for Bitcoin. For context, annual realized volatility measures what happened in the past. It also acts as one standard deviation of returns compared to the average return of a market.
High values of the statistic indicate high risk in the market. however, the achieved annually inconstancy was very low at the time of writing, meaning BTC had a high chance of rising.
Furthermore, investors buying even around $27,000 could be buying at a much lower value compared to the price the coin could reach in the near future.
Armed and ready for big deployments
It also appeared that traders shared the same sentiment as the analyst. This is evident from the Estimated Leverage Ratio (ELR). The ELR shows how much lever is averaged by users by dividing the Open Interest by the coin reserve.
An increase in the ELR indicates that investors are talking about highly leveraged derivative transactions. On the other hand, a decline implies caution when betting on the asset. CryptoQuant’s data shows that the ELR has fallen since August 14.
Source: CryptoQuant
But at the time of writing, the benchmark was back on an upward trajectory. This was confirmation of that trader bias in increasing BTC-related contracts.
Outside of the derivatives market, another metric to consider is the Stablecoin Supply Ratio (SSR). In any case, this measure would help determine the sentiment surrounding the spot market.
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By definition, SSR is the ratio of a coin’s market capitalization to the total market capitalization of all stablecoins. High values of SSR mean high selling pressure and a potential price drop.
Meanwhile, low values of SSR imply potential buying pressure and possible price increase. At the time of writing, Bitcoin’s SSR was very low at 7.55. This meant that investors had enough stablecoins to purchase BTC, and the coin could soon soar well above $27,000.
Source: CryptoQuant