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 “Higher Highs” in October, as well as historical volatility trends and correlations to gold and the S&P500.
- After setting an intra-month low of $10,384 on Oct. 2, bitcoin roared more than +28% to a 33 month high of $14,080 on Oct. 31 before finishing the month at $13,809.
- Notwithstanding bullish price action, annualized volatility finished down -20 percentage points at a 19-month low of 35.5%.
- Between bitcoin’s correlation with the S&P 500 sinking to a YTD low of -0.34 on Oct. 30 and an Oct. divergence between bitcoin’s volatility and the VIX, bitcoin looks to be decoupling from traditional financial assets.
- With Nov. being the fourth most volatile month on average (85%) and the third best yielding month when looking at median performance (+14%), one could expect price and volatility to climb in Nov.
- Although ~70K bitcoins left wallets with > ₿100, demand from wallets with < ₿100 more than offset “whale” profit taking, as evident by bitcoin’s relentless climb past $13,800 into month-end.
- With bitcoin rallying to a 33-month high, setting a higher high after 3 years of downtrending price action, and tending to go parabolic after breaking out of a macro downtrend, an ascent to $20,000 appears likely in the months ahead.
What to Watch?
THE SUPPRESSED POCKET (THE END)
- Notwithstanding bitcoin’s annualized volatility climbing as high as 60% and price climbing +45% since volatility troughed at 23% on July 24, bitcoin has yet to mean revert up to its 315-day moving average after slipping down into the “suppressed pocket” of 15-30% annualized volatility.
- With 99 days passing since said trough was formed and volatility on the cusp of falling back down into the “suppressed pocket,” an 8-year trend is on the verge of coming to an end.
- Should volatility fail to surface in Nov. and slip back below 30%, the mean reversion trend will be invalidated.
- Until volatility dips below 30%, history suggests that volatility can still mean revert up to the 315-day moving average of 66%.
THE WHALES & THE GOLDFISH
- Looking at the number of coins held in wallets with more than ₿100 and wallets with less than ₿100, one can see that the “whales” (> ₿100) took advantage of bitcoin’s remarkable Oct. rally.
- While nearly 70,000 bitcoins left wallets containing > ₿100 throughout Oct., demand from wallets containing < ₿100 more than offset profit-taking, as evident by bitcoin’s relentless rally to $13,800 into month-end.
- Should demand hold strong as bitcoin matures into its current $13,000 – $15,000 range, existing and newfound demand could accelerate bitcoin’s appreciation into year-end if FOMO resurfaces and bitcoin begins climbing to a new all-time high.
- Much like we’ve seen since March 2020, we anticipate whale accumulation to drive further appreciation.
- Last month’s $13,809 close didn’t just mark a 33-month high, but a higher high after 3 years of downtrending price action – a promising sign that a new bull market cycle may be around the corner.
- Given bitcoin’s parabolic past, July’s multi-year pennant breakout, and bitcoin’s latest move through $13,800 resistance, an ascent up to $20,000 may follow. Do note that bitcoin’s 8-year-old, uptrending line of support (~$11,000) could also be retested.
- As of Oct. 31, bitcoin has been trading above $10,000 for a record 97 consecutive days and has held above said level for 262 of bitcoin’s 3,727 trading days, or for 7% of bitcoin’s existence.