A recent Bloomberg article quoted Bloomberg Intelligence analyst Mike McGlone, who claimed that the current low volatility of Bitcoin it is "a sign of speculation that leaves the market and ultimately a fundamental process". McGlone also notes that "The high volatility is an important factor that decreases most cases of using cryptocurrency for something other than speculation."
The measure of volatility used in the article is the number of times in a month when Bitcoin saw daily price changes of 5% or more. Returning to January and February, this number was closer to ten. From April, this number remained at five or less and in October, at the time of publication of the article, it was only one.
Although this metric may seem a rough enough way to track the volatility of Bitcoin, other sources that also monitor the volatility of Bitcoin confirm this trend. For example, the Bitcoin Volatility Index shows that the volatility of the 30-day BTC / USD fell to 1.65%, the lowest value since the start of 2017.
Obviously, anyone who kept track of Bitcoin prices does not need fancy charts to know that volatility has declined; it's not what's in question. What is in dispute is whether this reduced volatility really is a sign that speculation is leaving the market and could be the starting point.
Technical analysis seems to indicate a depletion of the bitcoin market
Technical analysis, or charting, is a popular trading toolkit for making predictions about future price movements of a given asset based on its past behavior patterns. Traders have used technical analysis for activities ranging from currencies to commodities for decades, so it is not surprising that many are trying to do the same for Bitcoin and other cryptocurrencies.
Looking at the models of technical analysis of the recent price movements of Bitcoin, as McGlone seems to have done, it seems that the market is touching the bottom. The implication of this conclusion is that now it would be a good entry point to return to the market, particularly if you're a long-term hodler.
Possible limits of technical analysis when it comes to Bitcoin
However, the effectiveness of technical analysis for Bitcoin is a topic of much debate. Consider three basic assumptions of technical analysis: the market discounts everything, prices move in trends and history tends to repeat itself. When we observe these assumptions and try to apply them to Bitcoin, clear limitations appear.
For example, the first assumption that the market discounts everything means that all information is already reflected in the price. Considering the opacity of the Bitcoin market, its efficiency is highly questionable. The last two hypotheses can also be questioned by the brief history of Bitcoin; it may not be reasonable to suppose as such, especially when much of 2017 was a speculative bubble and that trading volumes before 2017 were a mere fraction of what they are now.
The conclusion is that when it comes to so-called experts who predict the future price of Bitcoin, always be skeptical. After all, if McGlone's prediction turns out to be wrong, it is doubtful that there will be another Bloomberg article about his erroneous prediction.