Sitting Sideways: Kraken Releases June 2020 Bitcoin Volatility Report

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

Key Takeaways

  • A lackluster market drove Bitcoin’s annualized volatility to a 6-month low of 51% amid a -31% MoM drop in trading volumes this June, making it the quietest month since February for the world’s largest crypto asset by market capitalization.
  • A reversal in trend caused Bitcoin’s correlation with the S&P 500 to strengthen (flipping from 0.13 to 0.52), while the correlation with gold weakened (going from 0.50 to -0.49), amid a global stock market recovery and increased confidence that economic conditions have bottomed.
  • In June, Bitcoin attracted considerable attention from the traditional financial industry; asset manager Wilshire Phoenix refiled an application with the SEC to offer Bitcoin to investors, J.P. Morgan claimed that Bitcoin successfully passed its first stress test in March and famed investor Jim Rogers claimed that “the [value of] virtual currencies represented by Bitcoin will decline and eventually become zero.”
  • Given June’s uneventful price action and Bitcoin’s tightened correlation with the S&P 500, market participants ought to pay close attention to CBOE’s Volatility Index (VIX) to better assess whether traditional financial markets will weigh on Bitcoin’s market dynamics as participants shift focus to equities.
  • With Bitcoin hovering beneath the resistance of a multi-year pennant formation for more than 2 months and holding above its 50-week moving average, some believe bitcoin is on the brink of embarking on a new bull-market cycle in the month(s) ahead.

What’s Next?

  • With the apex of a 2.5-year-old pennant only a few quarters away, Bitcoin will need to soon decide whether to break through resistance and embark on a new bull-market cycle or revisit support at roughly $6,000 – $7,000.
  • Because Bitcoin has been trending sideways for 2 months and remains a +10% jump short of breaking resistance, many market participants believe that Bitcoin is set to move considerably higher. This belief is also predicated on the fact that Bitcoin’s 50-week moving average continues to prove itself as ironclad support.
  • Before Bitcoin can confirm a successful breakout and invalidate what has been a multi-year macro downtrend, it will need to climb past $10,500 to set a higher high and trigger an uptrend.