Kraken’s Bitcoin Volatility Report: February 2020

Each month, Kraken publishes a report analyzing the volatility of Bitcoin. These reports are first shared with the exchange’s VIP clients before being shared publicly.

A historic day for Bitcoin, seen days after Kraken published its February volatility report internally.

This volatility report covers market movements in February, and was completed just prior to the historic drop and massive trading volume seen in Bitcoin on March 12th. Some takeaways:

  • In February, bitcoin soared to a 1-month high of $10,516 and hit levels not seen since late October of last year. Despite rallying as much as +12% in Feb. and +46.5% YTD, a correction in the second half of February sent bitcoin slumping -19% from its high.
  • Even though price fell at the end of the month, bitcoin’s network usage grew and closed the month down -9%, driving bitcoin’s annualized velocity up +10% to 13.3x.
  • Contrary to January and what we’ve observed in the past, bitcoin was notably more strongly positively correlated with traditional risk assets and more negatively correlated with traditional safe-haven assets; bitcoin’s 1-month correlation with the S&P500 went from 0.28 to 0.83 and from 0.70 to -0.37 with respect to gold.
  • While March tends to underperform February and is usually less volatile, March has historically outperformed February in instances where February closed out the month in the red.

At the end of February, Bitcoin is approaching the final innings of a multi-month and multi-year long pennant pattern formation, which suggests that a surge in volatility and trading volume could follow in the month(s) ahead as bitcoin enters into a new multi-month/multiyear trend.

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