Bitcoin is down over 3% and is trading below $18,500. At the same time, the total computing power for mining has reached an all-time high, bringing the cost of mining to $19,300. Doing the math, the cost of mining Bitcoin is now higher than the current price, prompting more miners to sell BTC and further increasing selling pressure on the king crypto.
Bitcoin has been behaving like tech stocks since the early days of the pandemic, although its volatility has been greater than that of the tech-heavy Nasdaq. After peaking at $69,000 in November 2021, bitcoin is down over 51% so far this year. Nasdaq’s action was similar. According to MarketSmith, it peaked at 16,212 in November and is down more than 30%.
However, in September, stock market volatility was higher than Bitcoin. While the Nasdaq lost 10.5% in the last month alone, Bitcoin has been range-bound. TThe price has been trading sideways between $19,000 and $20,000 for the past few weeks but dipped just below $18,500.
The low volatility of the last few weeks is reflected in the Bitmex Bitcoin Volatility Index, BVOL for short. a time-weighted average price index based on 30-day annualized volatility for bitcoin. The price is measured in 1 minute intervals for half an hour. BVOL is now below 25, down from above 80 in July.
The tight range signals that Bitcoin may consolidate ahead of its next big move. It is also trading around a key level as the coin has frequently found support around $20,000. In July, the coin rallied after hitting $20,108 as the stock market and Nasdaq surged in the late summer rally into August.
Low volatility leads to big movement
Historically, BVOL has fallen below 25 just before a large move in either direction.
On July 13, 2020, BVOL hit a low of 21.17 and this was followed by a bull run to Bitcoin’s all-time high of $67,549.74.
But before that, when the BVOL fell to 16.75 on November 5, 2018, it extended a year-long slump. The coin nearly halved in value, trading at $3,244 in just over a month. Year-to-date, that was down from $15,270 in January 2018. That was down over 70% during the 2018 bear market.
Volatility is a measure of how much price changes from a moving average. Bitcoin tends to make big strides on economic news. Last month’s CPI, which showed inflation still high at 8.3% in August, sent the king crypto down 7% in a single day.
Macro conditions are ripe for a spike again this time. Thursday’s CPI report came in at 8.2%, with prices up 0.4% as inflation remains high.
Bitcoin volatility is also likely to return due to the forex markets. The British pound fell close to parity with the US dollar in September, leading to a 1,150% increase in UK bitcoin trading volume in the last week of September.
So, what direction for bitcoin?
Bitcoin has fallen below $18,500 after this week’s CPI numbers.
Bitcoin has also moved along with the stock market. This means that if there is a rally, it also depends on the direction in which stocks are moving.
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