What to expect as Bitcoin volatility trends downwards

• Exchange withdrawals for BTC eclipsed deposits for the last three months.
• Bitcoin’s trading volumes have been muted for the most part of 2023.

Compared to previous months, August proved to be quite eventful for Bitcoin [BTC] as rallies and crashes once again became the norm. However, on zooming out it became evident that the king coin was going through perhaps its quietest stage ever.

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Bitcoin gets boring

An on-chain researcher took to social platform X to illustrate how Bitcoin’s supposed selling point – volatility – has plummeted in comparison to previous years. An attached graph in the post showed that Bitcoin Volatility Index sank below 50 in recent months, compared to 150 and beyond during the peak of 2021 bull market.

GM! ?

Take a moment to remind yourself.

You are living in one of the most boring periods in the history of #Bitcoin.

But it won't always be this way. pic.twitter.com/gA8me0i3aJ

— Emperor Osmo? (@Flowslikeosmo) September 2, 2023

One of the primary factors behind the boring price action of the world’s largest digital asset was investors’ hoarding mentality. More and more BTC holders were transferring their holdings to self-custody instead of trading them on crypto exchanges.

Prominent on-chain sleuth Ali Martinez highlighted that exchange withdrawals for BTC have been eclipsing deposits for the last three months. Such a development was unprecedented, as per Martinez.

Source: Ali with inputs from Glassnode

Apart from HODLing for long-term benefits, investors’ diminishing faith in exchange operations contributed to Bitcoin’s dwindling liquid supply.

In recent months, U.S. regulators launched crackdowns on some of the biggest trading platforms like Binance and Coinbase. As a result, the fear of losing access to their funds in an unexpected event drove people to hold them in self-custody.

Trading activity plunges in 2023

As can be seen, Bitcoin’s trading volumes have been muted for most part of 2023, per Token Terminal data. Though developments around spot ETF applications infused some volatility in August, trading activity was still considerably lower than March peak.

Source: Token Terminal

However, one encouraging development which came out from recent weeks was that BTC in particular, and the market in general, was responding more to crypto-specific events. Unlike previous years, when macroeconomic triggers from TradFi moved crypto prices, the decoupling has somewhat increased.

How much are 1,10,100 BTCs worth today?

Good times ahead?

At the time of writing, BTC exchanged hands at $25,896.67, per CoinMarketCap. A popular technical analyst appeared confident that the current bear market would soon give way to a bull run. 

#Bitcoin is racing down to realized loss on the 50-day moving average of the RPV ratio.

And if previous cycles tell us anything, this is the last time it happens until the next cycle top!

Each cycle, Bitcoin makes a… pic.twitter.com/Rrw7wYKbvA

— CryptoCon (@CryptoCon_) September 1, 2023