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Bitcoin [BTC]: Analyzing the ‘why’ behind its falling volatility

2min Read

The 60-day annualized volatility for Bitcoin slipped below 40%, making it the eighth such occurrence in the last five years.

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  • Over the last 30 days, Bitcoin’s volume declined by nearly 37%.
  • BTC worth $1.3 billion was taken off of exchanges on 15 May.

Bitcoin’s [BTC] volatility has again become a subject of interest for crypto watchers. According to Lucas Outumuro, head of research at blockchain analytics firm IntoTheBlock, the 60-day annualized volatility for the largest digital asset in the market has slipped below 40%, the eighth such occurrence in the last 5 years.


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The analyst used historical data to demonstrate that, on average, volatility stays below the specified level for 5 weeks before resulting in a 46% price gain for BTC. While this could inject great optimism among BTC bulls, Outumuro recalled three instances in which these circumstances came before a 50% fall in the value of BTC.

 

Trading activity cools down

Bitcoin’s trading ranges continued to narrow, indicating the rising level of market skepticism. Upon considering BTC’s price chart on a daily time frame, the king coin has oscillated within a range of $26,600-$27,400 over the last week.

The Bollinger Bands (BB) converged significantly since the high volatility phase seen in late March.

Source: Trading View BTC/USD

Moreover, Bitcoin’s trading volume also diminished considerably since March. Despite breaking through the $30,000 level in April, the monthly volume plunged to $492.2 billion, a whopping 55% drop from the $1.1 trillion seen during the month of May, as per data from Token Terminal.

Over the last 30 days, the volume declined by nearly 37%.

Source: Token Terminal

Another factor which could have contributed to the softening volatility was the marked decline in daily active addresses.

As per Santiment, the number of unique addresses involved in BTC transactions fell to 811.9k on 16 May. This marked a decline of nearly 28% from a month ago.

Source: Santiment

Bitcoin’s exchange outflows surge

Among other factors, the declining volatility indicated that large addresses might be engaging in a wait-and-watch strategy. This could be due to a lack of clear buy and sell signals from the market.

As per Glassnode, more than 48,560 BTC coins were taken off exchanges on 15 May, worth a whopping $1.3 billion.

Source: Glassnode


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The major chunk was withdrawn from Coinbase, which was the biggest pullback from the exchange in 2023 and the biggest since December.

Such large withdrawals can be explained by either a shift to a long-term holding strategy or a willingness to keep one’s money in self-custody.

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Saman Waris works as a News Editor at AMBCrypto. She has always been fascinated by how the tides of finance and technology shape communities across demographics. Cryptocurrencies are of particular interest to Saman, with much of her writing centered around understanding how ideas like Momentum and Greater Fool theories apply to altcoins, specifically, memecoins. A graduate in history, Saman worked the sports beat before diving into crypto. Prior to joining AMBCrypto 2 years ago, Saman was a News Editor at Sportskeeda. This was preceded by her stint as Editor-in-Chief at EssentiallySports.
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