- Low volatility could prove to be a good advantage for Bitcoin.
- Spot buyers appeared ready to give BTC a much-needed boost, and derivatives players were not left out either.
Bitcoin [BTC] Volatility has remained low over the past three months, causing the king coin to consolidate between $25,000 and $26,000. Interestingly, at press time, BTC was back above $27,000.
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This increase has sparked great enthusiasm among market participants.
Don’t cancel BTC yet
On September 18, Halving Cycles creator CryptoCon opined that low volatility had not entirely pushed BTC out of bullish territory. He did, however, mention that the drop to $25,000 was similar to 2015, when Bitcoin returned to its lowest level.
Even with the latest price drop, #Bitcoin 3-month volatility remains extremely low.
Such low volatility has never been seen outside of bullish price activity.
So how did we go from 29,000 to 25,000?
This scenario is starting to look like… pic.twitter.com/QY4RPvhe8r
– CryptoCon (@CryptoCon_) September 17, 2023
Using realized annual volatility, CryptoCon concluded that the decrease in volatility would eventually be bullish again for Bitcoin. For context, annual realized volatility measures what has happened in the past. It also acts as a standard deviation of returns from the average return of a market.
High values of the metric indicate high risk in the market. However, the annual achieved volatility was very low at the time of writing, meaning BTC had a high chance of rising.
Additionally, investors who buy 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 bets
It also seemed that traders shared the same sentiment as the analyst. This was revealed by the estimation of leverage ratio (ELR). The ELR shows how leverage is used on average by users by dividing the open interest by the coin supply.
An increase in ELR indicates that investors are talking about highly leveraged derivatives trades. On the other hand, a decline implies caution in betting on the asset. According to data from CryptoQuant, ELR had been falling since August 14.
Source: CryptoQuant
But as of press time, the metric was back on the rise. It was the confirmation of trader bias by increasing contracts linked to BTC.
Outside of the derivatives market, another metric to consider is the stablecoin supply ratio (SSR). At least this measure would help determine sentiment around the spot market.
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By definition, SSR is the ratio of the market capitalization of a coin to the overall market capitalization of all stablecoins. High SSR values mean high selling pressure and potential price decline.
Meanwhile, low SSR values imply potential buying pressure and a possible increase in prices. At press time, Bitcoin’s SSR was very low at 7.55. This meant that investors had enough stablecoins to purchase BTC, and subsequently, the coin could soon surpass $27,000.
Source: CryptoQuant
