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Kraken Intelligence, our team of in-house research experts, has released its Bitcoin Volatility Report for July 2020.
- A remarkable +14.5% rally between Monday, July 27 and Friday, July 31 resulted in Bitcoin crossing $11,000 for the first time in nearly a year, more than $11 billion in volume traded and an annualized volatility of 45%.
- Concerns over the state of the global economy and a shift towards safe haven assets resulted in Bitcoin’s rolling 30-day correlation with gold flipping from a 10-month low of -0.66 on July 2 to a 1-year high of 0.93 on July 31.
- The OCC’s approval of U.S. nationally chartered banks providing crypto custody services, gold hitting an all-time high and Bitcoin’s dominance falling to a 1-year low set the stage for bitcoin’s +24% rally in July.
A number of signals point to possible higher volatility and higher prices in the months ahead.
- In late July, Bitcoin broke out of a large, 2.5-year “pennant” formation, a move many believe could indicate the start of the next bull cycle. Further, price settled above $10,500, making a higher-high that added support to the upward trend.
- Now that we are above $11,000, Bitcoin is trading in territory it has only been in for about 2.5% of its entire history. This may lead to higher volatility and higher prices as Bitcoin unlocks new levels of support and resistance and navigates uncharted waters.
- On 12 separate occasions, Bitcoin’s annualized volatility bottomed between 15% – 30% before climbing, on average, to 140%. Considering that, and the fact that Bitcoin set a 21-month volatility low of 23% on July 24, volatility could exceed 100% as bitcoin rallies somewhere between +50% and +200% in the months ahead.
- August is historically the third most volatile month on record with a 9-year average annualized volatility of 88%. If the pattern holds, we can expect volatility to continue trending higher next month.