Kraken’s Bitcoin Volatility Report: May 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 climb back above $10,000 in May, as well as historical volatility trends and correlations to gold and the S&P500.

Key Takeaways

  • In May, Bitcoin climbed back above $10,000 for the first time in 10 weeks and set an intra-month high of $10,080 before finishing the month up +10% at $9,447.
  • The month concluded with Bitcoin’s rolling 30-day correlation with the S&P 500 falling to 0.13. At the same time, its correlation with gold stood strong at 0.50, supporting claims the asset is acting as an alternative store of value and an uncorrelated asset with respect to risk-on assets.
  • With June typically being more volatile than May (generating an average and median return of +14% and +18%, respectively), Bitcoin could continue trending higher amid a revival in market volatility.
  • Bitcoin’s 7-day average mempool transaction count further hit its highest level in more than 28 months in late May, suggesting higher volatility in the weeks ahead given historical trends.
  • For five consecutive weeks, Bitcoin has tested the resistance of a multi-year pennant pattern formation. With Bitcoin holding near resistance, June could bring a break or rejection that translates to increased volatility.

What to Watch for Next:

  • High volatility? On average, June is Bitcoin’s third most volatile month and has historically returned +14%.
  • The mempool: With the 7-day average mempool transaction count recently hitting its highest level in 28 months, increased volatility in June could send prices notably higher or lower.
  • Toward $10,000 or back to $6,000? Bitcoin has been trying to surpass $10,000 for the past five weeks. If the bulls fail to break through resistance,  a correction could send bitcoin down towards the support of the multi-year pennant pattern at roughly $6,200.

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