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Bitcoin traders expect a significant increase in volatility as the leading cryptocurrency continues to recoup almost all of its losses since it hit just below $ 20,000 at the end of 2017. If the volatility comes from an increase in purchases or sales it is a matter of disagreement.
Through the current bitcoin rally, volatility has remained low. Since the end of August, 30-day volatility has remained below 0.03, and 180-day volatility has steadily declined from 0.05, according to data from Coin Metrics.
Over the same period, bitcoin gained nearly 80% after a brief drop to $ 10,000 in early September.
As bitcoin approaches its long-awaited all-time record, some reactive selling is expected, said Mike McGlone, senior commodity strategist for Bloomberg Intelligence, in an email to CoinDesk.
But “a wave of institutional flows appears to have just begun and offset the relative youthfulness of bitcoin’s past while keeping its upward trajectory intact,” added McGlone. Any sale at record highs should only “act as a leap in speed” for bitcoin’s long-term trajectory, he said.
Regardless of which side of the market investors choose to bet, according to Sam Trabucco, quantitative trader at Alameda Research, “high” volatility seems likely in the very near future.
Some sales could come from investors looking to make some paper gains after hitting a historic price level as the number of bitcoin addresses in profit surpassed 98% on Monday, according to Glassnode. Since the beginning of December 2017, there weren’t that many profitable addresses on the card.
To Joseph Todaro, partner of Greymatter Capital, reaching a new all-time high will likely trigger significant selling as the market is likely to repeat its reaction to previous all-time highs as “traders rely heavily on historical price action”. CoinDesk said in an email.
In 2016, for example, bitcoin’s approach to an all-time high was “met with significant selling pressure,” Todaro explained. He expects the same response from bitcoin approaching $ 20,000, followed by consolidation and then renewed upward momentum.
The previous all-time high represents a significant turning point in mainstream interest in bitcoin, said Kyle Davies, co-founder of Three Arrows Capital, in a direct message with CoinDesk. At that point, mainstream interest is expected to accelerate.
Mainstream attention should trigger significant volatility to the upside, now to the downside, according to Davies. “We won’t see resistance. We will see the discovery of prices, “he said.
