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Kraken Intelligence, our team of in-house research experts, has released its Bitcoin Volatility Report for September 2020.

Key Takeaways

• September kicked off with bitcoin’s annualized volatility touching a 5-week low of 38.8%, followed by a rally above 50% on September 3. It then bounced between 50% and 56%, and snapped a 5-month downtrend by concluding September at 55.4%.
  

• Bitcoin’s correlation with the S&P 500 sank to an 8-month low of -0.27 in the first week before rebounding and finishing the month at 0.60. Inversely, bitcoin’s correlation with the U.S. dollar index (DXY) momentarily turned positive before resuming a 5-month trend of negative correlation.

• It was business as usual last month with September seasonality weighing on global assets and dragging bitcoin -8% lower MoM – in line with the month’s 10-year average (-7%) and median (-8%) returns.

• With bitcoin coming off what is, on average, the least volatile month of the year, one ought to expect incremental market volatility to surface as 4Q2020 begins.

• In addition, the ever-growing number of addresses containing between 1,000 BTC and 10,000 BTC and the number of coins held in these addresses suggests that Bitcoin’s strong fundamentals and vigorous demand from “smart money” is not entirely reflected in bitcoin’s price.

What to Watch for Next

• Better Returns in October: With bitcoin’s worst-performing month now behind us, October may outperform September, just as it has for 8 of the past 9 years, with an average return around +11%. Note that bitcoin has underperformed its monthly average in 6 of the past 9 months.

• The Suppressed Pocket (Again): Twelve times in the past, bitcoin’s annualized volatility bottomed between 15% and 30% before climbing, on average, to 140% and returning +196% over 94 days. As of the end of September, 68 days have passed since the volatility low of 23% set on July 24, with volatility rising to 55% and price gaining +12%. So, history indicates that we may have ample room for higher volatility and gains, though only about one month remains for bitcoin to match its historical averages.

• Fundamentals Lookin’ Good: Bitcoin’s fundamentals continue to look good, with both the average hashrate and average number of active addresses continuing to trend higher at a pace that doesn’t seem to be fully reflected in the spot price. 

• The “Smart Money” is Alive and Well: The number of addresses containing between 1,000 BTC and 10,000 BTC continues to grow strongly. Further, the total number of coins held in these addresses is still growing. Overall, the numbers indicate a strong pattern of accumulation that started about 7 months ago.