Kraken’s Bitcoin Volatility Report: April 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.

This volatility report covers Bitcoin’s recovery off March lows, as well as volatility trends and correlations with gold and the S&P500.

  • Bitcoin posted its best monthly return (+35%) in nearly a year while trading volume and volatility fell -21% and -59%, respectively.
  • After trending higher since November 2019, Bitcoin’s annualized velocity choked -12% MoM and hit a 2020 low of 11.9x; the drop suggests that the growth of network activity failed to keep pace with the +35% rally off of March’s 10-month low of $6,422.
  • Bitcoin’s 30-day rolling correlation with gold and the S&P500 fell substantially after exhibiting a strong positive correlation in March. Bitcoin’s 30-day correlation with the S&P500 declined to 0.59 and to a 6-week low of 0.30 with respect to gold.
  • Mid-way through the month, Bitcoin surpassed its 50-day simple moving average for the first time since February 26; Then, on April 29, Bitcoin crossed over its 200-day simple moving average for the first time since March 8.
  • Bitcoin finished the month $1,400 shy of its psychologically significant $10,000 resistance, a level that coincides with a multi-year pennant pattern formation.
  • The tendency for annualized volatility to enter into a multi-year long period of lower-lows/higher-lows indicates that volatility may head lower in the near term.

Things to look out for:

  • Volatility uptrend? While annualized volatility broke below the 315-day moving average in April, signalling volatility is likely to head lower in the short term, volatility is in the midst of an uptrend extending back to November 2018. Bitcoin’s volatility has historically entered into multi-year uptrends and downtrends.
  • The $10,000 mark – This is an important level psychologically, and if price reaches and holds above this level, it could mark the break of a multi-year macro downtrend. This level also coincides with a multi-year pennant formation.
  • Bitcoin’s Hash rate – Although it recovered nicely in April, market participants should pay close attention to mining activity, as a pullback could signal incremental miner capitulation and thereby send price lower.
  • COVID-19 – Continued uncertainty surrounding the coronavirus and its impact on the global economy will likely keep traditional financial markets on edge, and this fear may also trickle into bitcoin.

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