The latest news for Bitcoin and the crypto market speak of a return to volatility after a period spent under the banner of low trading volumes on centralized exchanges.
In such a delicate context like this, compounded by the complexity of macro data in the United States, cryptocurrency holders are continuing undaunted to accumulate satoshi in anticipation of the next bull run.
Let’s take a look at all the details together.
Latest Bitcoin news: liquidity at record lows, but the crypto asset’s volatility returns
Crypto trading venues in recent weeks have seen one of the lowest levels of trading volume and market liquidity since the bull run of 2021.
The latest rally that pushed Bitcoin above $30,000 allowed for a positive swing in the price volatility index, which nevertheless still remains at very low levels.
In detail, the standard deviation from the average price recorded on a monthly basis for Bitcoin has increased from 1.6% at the end of May to 2.57% today.
To give an idea, in June 2021, in the midst of the price rise of the entire crypto sector, that figure crossed the 6% threshold.
A market with the current conditions reflecting low liquidity and volatility on a slight upswing, in an overall price movement that has seen laterality following the last pump, is synonymous with indifference on the part of financial players.
It is worth noting that low liquidity is synonymous with potential price manipulation by whales, who, with relatively little capital, are able to move the market in the direction they prefer. It is crucial not to be fooled by false movements and sudden spikes during this sensitive period.
The options market also remains inexorably uninteresting: the volatility of derivative instruments on Bitcoin, prior to the Blackrock news, had touched one of the lowest levels in 3 years.
However, starting on 18 June, we witnessed a spike in that index from 42% to 57% in a matter of days, and then stagnated at the current values of 47%.
These latent conditions in the crypto market are likely to continue in the coming months, suggesting that the worst may be behind us by now.
Holders continue to accumulate Bitcoin even during the latest rise in the volatility index
Despite Bitcoin recently hitting multi-year lows in volatility and trading volume indexes, we can see that holders of the world’s most capitalized cryptocurrency are steadily accumulating.
In fact, very little importance is given to the market situation by those who tend to do DCA on Bitcoin without giving too much thought to the cryptocurrency‘s price.
The resilience of demand is supported by the approach to Bitcoin’s long-awaited halving event, which will occur in about 300 days.
In general, the months leading up to the event that results in the halving of rewards for miners, engaged in block production, statistically causes an increase in prices for BTC, which becomes more expensive in view of the increased scarcity in the digital sphere.
Holders take advantage of unattractive markets in the eyes of traders to accumulate satoshi and continue their accumulation strategy undeterred.
While the balances of miners, exchanges and whales decline, those accumulating the main crypto asset are adding an average of 42,200 BTC per month, taking up a significant chunk of the circulating supply.
Looking at the “Bitcoin Hodler Net Position Change” graph, we can guess, based on past experience, that this picture could continue in this direction for another 6-12 months, pending the rise of crypto market prices and the beginning of an inverted red phase.
It will be crucial to watch how the market reacts and how the various entities in the Bitcoin ecosystem behave in such a complex market situation, which sees tensions appearing between investors and regulators in the United States and uncertainty in macro data as well.
Bitfinex analysts, in a weekly report analyzing on-chain movements in the crypto sector, suggest paying attention to the evolution of the metrics we have presented.
“As the market continues to transform in response to its inherent dynamics and exogenous factors, including regulatory changes, the resilience and adaptability of the cryptocurrency market will continue to come under rigorous scrutiny.”
A look at macro data in the United States
Having analyzed the Bitcoin volatility indexes and observed the behavior of cryptocurrency holders, let’s now take a look at the macroeconomic situation in the US.
Only yesterday, the asset manager of the banking institution HSBC warned investors that the US could fall into recession starting Q4 2023, leading the country to a condition of economic decline for at least 1 year.
Many other indicators such as the “Leading Economic Index” (LEI), which forecasts a nation’s future economic activity, indicates that the US recorded its 14th consecutive month of economic decline, with a 0.7% decline during May.
In any case, the danger of recession is hampered by the presence of a robust labor market and the recovery of the housing sector.
Home prices in the United States recorded a major increase not seen since 2016, giving signs of recovery for the economy.
According to Commerce Department data, the rate of new home construction increased 21.7% year-on-year to a peak of 1.63 million new homes for the country’s population.
New construction site commissioning applications also grew by 5.2% in the past year, which corresponds to 1.49 million new units.
However, complicating the situation is the painful increase in interest rates on fixed mortgages for households, which have not seen interest rates this high since 2008.
As of September 2021, the “mortgage rate” on 30-year fixed-rate mortgages increased by 4.2% if we calculate the top in November 2022.
The situation now seems to be under control, with the worst behind us, seeing that 2023 has observed a stabilization of this figure.
It remains central to observe how the situation in the real estate industry will evolve, and whether households will be able to endure such high interest rates and continue to fuel the economy by buying new homes, or will prefer to save money by causing prices to fall in the markets.
Adding to the thrilling macroeconomic picture is the Federal Reserve, which has announced that it will undertake a reversal toward more expansionary monetary policies in early 2024.
In the coming months, investors expect two more increases in interest rates on government bonds, with 71.9% of them expecting a 25 basis point hike at the next FED meeting on 26 July.
Powell is aware that inflation has remained too high during the last few years of monetary restraint and it will not be easy to bring it back to the pre-set values of 2%.
During the last meeting of Fed officials, he emphasized the importance of price sustainability so that the market can benefit from future liquidity injections without losing too much ground at this sensitive stage.
The situation is indeed complex: the United States is poised between fears of an economic recession resulting in stagnant economic growth in the country, and the resumption of expansionary monetary policies supported by a resilient housing sector and labor market.