At press time, Bitcoin is down 0.26 percent on the day, trading at around $3,976 after a brief mid-day high of $4,005, according to CoinMarketCap data. Looking at its weekly chart, the current price is over 8 percent lower than $3,643, the price at which Bitcoin started the week.
Ethereum (ETH) is keeping its position as the largest altcoin by market cap, which is nearly at $15.6 billion. The second-largest altcoin, Ripple (XRP), has a market cap of about $13.3 billion.
Ethereum is up by little over a tenth of a percent over the last 24 hours. At press time, ETH is trading around $148, after having started the day at the same price and reporting a mid-day low of about one dollar lower. On its weekly chart, Ethereum has seen its value increase nearly 17 percent from $123, the price at which the coin started the week.
Ripple has lost 0.33 percent in the 24 hours to press time and is currently trading at around $0.32. On its weekly chart, the coin gained nearly 6 percent from $0.302, the price at which XRP started the week.
The Bitcoin price has become relatively stable over the last few weeks. In fact, according to Buy Bitcoin Worldwide, the 30-day volatility index for BTC is now at 2.55% — the lowest since July.
What does this drop in volatility mean for Bitcoin? Could it serve as a driver for further merchant adoption or is it simply reflective of a shift in the attitudes of traders?
Is Bitcoin’s Low Volatility Simply a Case of Bored Traders?
Whether you are a seasoned Bitcoiner or have only heard about the number one digital asset from a few mainstream news articles, you are bound to know about its volatility. Massive price swings in either direction are common. This has made it a highly lucrative asset to trade – providing you know what you are doing.
However, recently volatility has been dropping. According to a Tweet by self-proclaimed Bitcoin enthusiast Alec Ziupsnys, the swings in Bitcoin price have been declining over the years:
This is supported by research conducted by Buy Bitcoin Worldwide and reported by Market Watch. The publication provided speculation about the reasoning behind such declining volatility from Elements Digital Asset Management.
In a write up focused on Bitcoin’s volatility, Elements portfolio director, Thejas Nalval, and director of quantitative research Kevin Lu stated that it was too premature to claim that the market was adopting Bitcoin as a store-of-value and thus there was less buying and selling pressure to create Bitcoin price swings. The pair also rejected the notion that transparency and increased market efficiency had caused the drop.
Instead, they favoured a rather less exciting narrative:
“We’re a bit more sceptical. We think the market has quite simply just run out of juice for now. It’s almost become boring.”
This makes a lot of sense. Many amateur traders have likely fled the market after suffering losses as a result of the ongoing bear market. Whilst those that have been successful at trading Bitcoin are likely still looking for opportunities to trade, the lack of “dumb money” creating the massive market shifts seen previously will have prompted many to explore other markets too.
Recent big news events have barely impacted the price of Bitcoin at all. This shows that there is less money prepared to move in and out of the market based on short-term events – the kind of emotional trading decisions made by non-professional market participants.
Could Low Bitcoin Volatility Drive Adoption?
One of the biggest hurdles for merchant adoption of Bitcoin has always been the volatility of the currency. Retailers and customers alike do not enjoy the idea of overpaying or undercharging for an item in the time it takes a transaction to process. Therefore, it figures that lower volatility should encourage more retailers to accept the number one digital currency, right?
Well, maybe. It is certainly true that many merchants and customers would prefer to see Bitcoin at stable prices before they are prepared to use the digital asset as a medium of exchange.
However, it is important to remember that we are still in the very early days of this experiment in decentralised finance. For the kind of stability in prices needed for all merchants and customers to be happy using Bitcoin for everyday purchases, the market would need to be many orders of magnitude bigger than it is today. Essentially, the volatility would need to drop as a result of the sheer size of the market, rather than traders simply finding other markets to profit from.
People across the globe still want to make money trading. As soon as the Bitcoin market moves in one direction or another, there will be traders ready to take advantage of the swings once again. This will create new volatility and as the market becomes “exciting” once again, more will come to try their hand at buying and selling Bitcoin. This creates a sort of feedback loop as the more trying to make cash through trading means the greater the volatility will be – until the market reaches such colossal proportions that traders buying and selling the asset has little impact on the price. When or more accurately if this occurs, the price of Bitcoin would be higher than many but the most bullish today could possibly imagine.
The biggest cryptocurrency, Bitcoin (BTC), is slightly up 0.05 percent, trading at $3,658 at press time. Bitcoin has climbed 5.65 percent over the past 7 days amidst all but one top 20 cryptocurrencies by market cap seeing solid growth over the week.
Ethereum (ETH), the top altcoin that regained its place as the second-largest crypto by market cap on Feb. 11, is up around 1 percent at press time. After dropping to as low as $103 per coin earlier this week, Ethereum is up almost 15 percent over the past 7 days, and is trading at $123.
Total market capitalization is hovering around $121.6 billion, with an intraday low amounting to $119 billion. Daily trade volume is still relatively high with $20 billion traded on the average over the 24-hour period, while for most of the month it hovered between $15-$17 billion.
EOS (EOS), the fourth top crypto by market cap, is seeing the biggest growth among top 20 cryptocurrencies, up around 6.6 percent over the past 24 hours at press time. In contrast, Binance Coin (BNB) is seeing the biggest losses, down 4.46 percent.
Over the past 7 days, Litecoin (LTC) is up the most, having grown by almost 30 percent at press time.
Earlier today, United States (U.S.) digital asset firm Morgan Creek Digital raised $40 million in funding from investors that included two major pension funds, in order to launch a new venture capital fund focusing on investing in the digital asset industry. Morgan Creek Digital Assets founder Anthony Pompliano claimed that the new fund intends to educate stakeholders to demystify the nascent crypto industry.
Recently, chair of the Financial Stability Board Randal K. Quarles claimed that cryptocurrencies as an asset class “may challenge any framework” for financial stability.
Meanwhile, U.S. stock markets have rallied today, with the Dow Jones Industrial Average (DJIA) rising around 1.49 percent, while the S&P 500 has increased by 1.29 percent, and the Nasdaq Composite Index grew by 1.42 percent at press time. Art Hogan, chief market strategist at National Securities, told CNBC that the current situation on stock markets may mean that the U.S. government shutdown was avoided.
Major oil indexes have also seen a significant growth, with the Canadian Crude Index rising around 1.3 percent, while West Texas Intermediate (WTI) is up 1.47 percent, Brent Crude growing by 1.61 percent, according to oilprice.com. The oil market is allegedly seeing a wave of green in ahead of the release of OPEC’s monthly market on the day.
Bitcoin price surged 11% after being led by Litecoin’s impressive 30% move earlier in the day. The cryptocurrency market is also up 10% as a whole at the time of writing.
Bitcoin Price: 1 Day Chart
As Bitcoinistreported on Monday, we were expecting a volatile week and as Friday came it did not disappoint, with Bitcoin price 00 blasting out of its descending wedge, through resistance at $3500 and hitting the $3700 target, which we have been watching for some time.
This level represents a significant level where the horizontal resistance at $3700 meets the descending diagonal resistance, so going into the weekend, BTC will have work to do if we are to see a push towards $4000.
A weekly close above $3500 will be significant for Bitcoin price, finding support on the 200-week moving average with a tweezer bottom and a bullish engulfing candle.
This may open the door over the coming weeks to attack $4000 which would complete the Adam and Eve bottom pattern, pending a breakout which is being closely watched by traders both as an area of short interest and as a significant breakout level.
Despite this, we must remember that we are locked in a bear market and the bears will very much see this as an opportunity to re-open short positions.
Overall, this move implies that there are more buyers than sellers at the low $3000 prices and is encouraging. We will be watching closely going into the weekend.
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Fundstrat Global Advisors strategist Robert Sluymer has warned that Bitcoin and the cryptocurrency market as a whole are displaying signs of vulnerability.
‘Price Structure Remains Weak’
Robert Sluymer from Fundstrat Global Advisors has said in a note Wednesday, February 6th, that Bitcoin 00 and most of the cryptocurrencies display signs of vulnerability, Bloomberg reports.
The expert’s take is that digital currencies appear vulnerable to breaking to new lows despite already shedding well over 80 percent since the peak in the beginning of 2018.
The price structure for most cryptocurrencies remains weak and appears vulnerable to a pending breakdown to lower lows.
The entire cryptocurrency market has dropped slightly by $1 billion so far this week with the total market cap currently sitting just above $111 billion.
The $100 billion mark indeed appears to be a strong psychological level of support as proved in mid-December. In fact, the last time the total cryptocurrency market cap saw double digits was in August 2017.
$3,100 – Key Level to Watch for Bitcoin
The analyst also outlined that a key level to watch for Bitcoin is the $3,100 mark.
“A break below the fourth-quarter lows at $3,100 would imply a decline to $2,270, while a move above $4,200 is needed to signal Bitcoin is beginning to improve,” he said.
Bitcoinist reported this week that Bitcoin is in for volatile days ahead. Additionally, it appears that institutional interest comes into play on breaks of key support levels. Hence, a failure to defend support at $3,000 could mean a sharp decline to the downside.
Sluymer refrained from giving any predictions regarding Bitcoin’s price in the future.
Most recently, in December 2018, the Head of Research at Fundstrat Global Advisors, Tom Lee, said that Bitcoin’s fair value is between $13,800 and $14,800. He based his merits on the number of active wallet addresses, usage per account, as well as factors “influencing supply.”
Lee also refrained from predicting the price of Bitcoin, after his end-of-2018 $25,000 BTC price prediction was missed by a long shot.
What do you think of Fundstrat’s current position on Bitcoin? Don’t hesitate to let us know in the comments below!