Kraken’s Bitcoin Volatility Report: August 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 report covers Bitcoin’s grind higher in August, as well as historical volatility trends and correlations to gold and the S&P500.

Key Takeaways

  • A surge in volatility in late-July trickled into August and subsequently drove annualized volatility up to an intra- month high of 60% on August 25, in addition to a +53% jump MoM in volume traded.
  • Bitcoin remained range bound between $10,590 – $12,480 for the month of August before finishing up +3% at $11,657, resulting in the weakest monthly positive return since June 2017.
  • Bitcoin’s strong, positive correlation with the S&P 500 and gold persisted into August and climbed as high as 0.84 and 0.97 before plunging to -0.02 and 0.25, respectively. The ascension of bitcoin’s correlation with gold to 0.97 on August 10 marked an all-time high.
  • A rally to an intra-month high of $12,480 coincided with Nasdaq-listed MicroStrategy announcing a $250M bitcoin purchase as part of a new “capital allocation strategy,” Berkshire Hathaway purchasing a majority stake in Barrick Gold mining company, and gold rallying to an all-time high of $2,075/oz.
  • With annualized volatility having historically mean reverted up to its 315-day moving average after falling as low as 15%, coupled with signs of expensive U.S. equities, a multi-year low for bitcoin’s dominance, and a record number of bitcoins remaining untouched for more than a year, market dynamics suggest that incremental volatility is likely on the horizon.

What to Watch?


  • Looking back to January 2012, one can observe 12 separate occasions whereby bitcoin’s volatility slumped into a “suppressed pocket” of 15% – 30% before surging higher.
  • In every instance, bitcoin’s volatility climbed, on average, to 140% and returned +196% over 94 days. Additionally, on every occasion, volatility mean reverted up to its 315-day moving average, a line of best fit when comparing mean squared errors (MSE) amongst 3-month, 6-month, 9-month, and 1- year moving averages.
  • Considering that bitcoin has only returned +25%, has yet to approach its 315-day moving average of 78%, and only 38 days have passed since volatility troughed at 23%, history indicates that incremental market volatility should be expected.


  • Since the start of 2020, altcoins have been stealing market share from bitcoin. Following the emergence of DeFi in Q2, bitcoin’s dominance has fallen further.
  • Although bitcoin could continue to lose market share and underperform, richening altcoins will translate to an eventual rotation back into bitcoin amid a reclamation of dominance.


  • Not only did the S&P 500 hit an all-time high in August, but its forward P/E multiple, a ratio of price to estimated future earnings, rose to an all-time high of 27.8x – surpassing the dot com of 2000.
  • The jump suggests that stocks are relatively expensive and could cheapen in the months ahead. Such a correction could have an impact on bitcoin & the broader crypto market, for better or for worse.


  • As of August 31, a record 63% of Unspent Transaction Outputs (UTXOs) on the Bitcoin blockchain have not moved in +1 year, indicating than an unprecedented 63% of mined bitcoins are in the hands of long-term holders. Said dynamic has not only foreshadowed a new bull market, but incremental market volatility as participants move their richened bitcoin.
  • By keeping a close eye on how the 1+ Yr. HODL wave trends going forward, one can better predict incremental market volatility and potential price appreciation in what is presumably a new bull market cycle.

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