Bitcoin Volatility Hits Historic Lows- Bitcoin’s $90,000 Support Tested as Volatility Drops
Bitcoin Volatility Hits Historic Lows– Bitcoin enters the final days of February facing a volatile and uncertain market environment, with its price fluctuating around $95,420. Despite lingering concerns surrounding global inflation data and growing fears of stagflation, Bitcoin’s implied volatility has fallen to historical lows, reflecting the lack of decisive movement from both bulls and bears.
As the cryptocurrency market continues to stagnate, Bitcoin’s price has been stuck in a narrow range following a failed breakout attempt last week. According to trader CrypNuevo, the liquidations on either side of the price suggest potential for movement, but Bitcoin’s price will likely be confined between key levels of $94.7k and $92.5k. On the other hand, some traders believe a potential dip toward the $90,000 mark is inevitable if Bitcoin fails to hold above these crucial levels.
Roman, another trader, expressed caution, noting the lack of bullish momentum and signaling that a revisit of the lower support level near $90,000 seems more likely. On the other hand, some analysts believe Bitcoin may eventually break out of this tight range if it can close above $98.4k.
Inflation Data and Stagflation Concerns Loom Large
With the release of the US Personal Consumption Expenditures (PCE) Index scheduled for February 28, markets are bracing for more insights into the health of the US economy. The PCE is the Federal Reserve’s preferred measure of inflation, and it is expected to show further signs of rising inflationary pressure, which could exacerbate concerns about stagflation—a combination of stagnant growth and high inflation.
Mosaic Asset, in its recent newsletter, warned about the economic implications of stagflation, noting that such periods in the past had mixed effects on stock markets. According to their analysis, despite the negative growth environment, the S&P 500 delivered positive returns during stagflation years about 75% of the time.
Gold Soars as Bitcoin Follows Slow Path
While Bitcoin struggles with market fluctuations, gold is setting new all-time highs, reflecting growing demand as a “safe haven” asset. According to Kobeissi, gold has experienced a 24% rise since late July 2024, in contrast to the modest 2% increase in the US Dollar and an 8% rise in the 10-year note yield. This surge in gold prices, driven by geopolitical uncertainty and fears surrounding US trade policies, highlights the ongoing demand for stability.
Interestingly, some experts have pointed out that Bitcoin often follows gold’s price movements with a delay of a few months, suggesting a potential breakout for Bitcoin once gold’s bullish trend continues.
Bitcoin’s Implied Volatility Near Record Lows
Bitcoin’s price movement remains subdued, and its implied volatility has dropped to near-record lows, signaling a lack of major market changes. According to Glassnode, Bitcoin’s 1-week realized volatility has fallen to 23.42%, which is among the lowest readings observed in recent years. Historically, such compressions in volatility have been followed by significant market shifts.
Bitcoin’s network activity and sentiment indicators suggest a growing sense of caution among investors. Active wallet addresses have decreased since the US presidential election, and some on-chain analysts believe this decline may indicate the potential for a market correction similar to the one seen during the 2017 bull run. Additionally, the Crypto Fear & Greed Index currently measures 49/100, reflecting a neutral market sentiment.
As the accumulation rate of spot Bitcoin ETFs slows and minor capital outflows are observed, some analysts, like Avocado_onchain, warn of a potential “investor exodus” if this trend continues. However, they also note that a simple decline in UTXOs (Unspent Transaction Outputs) is not conclusive proof that the bull cycle has ended.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.
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