Kraken’s Bitcoin Volatility Report: September 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 “Business As Usual” in September, as well as historical volatility trends and correlations to gold and the S&P500.

Key Takeaways

  • Sept. kicked off with bitcoin’s annualized volatility touching a 5-week low of 38.8%, only to then rally above 50% on Sept. 3, bounce between 50% and 56%, and snap a 5-month downtrend by concluding Sept. at 55.4%.
  • Bitcoin’s correlation with the S&P 500 sank to an 8-month low of -0.27 in the first week before finishing the month at 0.60. Inversely, bitcoin’s correlation with the U.S. dollar index (DXY) momentarily turned positive before resuming a 5-month trend of turning strongly negatively correlated.
  • It was business as usual last month with Sept. seasonality weighing on global assets and dragging bitcoin -8% lower MoM – in line with the month’s 10-year average (-7%) and median (-8%) returns.
  • With bitcoin coming off what is, on average, the least volatile month of the year, in addition to Oct. typically being 10 percentage points more volatile than Sept., one ought to expect incremental market volatility to surface as 4Q2020 begins.
  • In addition to the uptrend in the 7-day moving average of bitcoin’s hash rate and 7-day moving average of daily active addresses, the ever-growing number of addresses containing between 1,000 and 10,000 and the number of coins held in said address balance tranche suggests that bitcoin’s strong fundamentals and vigorous demand from “smart money” is not entirely reflected in bitcoin’s price.

What to Watch?


  • As of month-end, 68 days have passed since bitcoin dipped into the “suppressed pocket” (15% – 30% volatility). Since then, bitcoin has returned nearly +12% and volatility has risen to 55%. Given the prior 12 instances where volatility fell into said pocket, bitcoin remains far from the median +45% return and median 107% peak in volatility.
  • With bitcoin’s rich history of mean reverting up, and often through, volatility’s 315-day moving average, it stands to reason that volatility could rise somewhere in the neighborhood of 12 percentage points in Oct. to test the 315-day moving average of roughly 67.5%.
  • Although history does not have to repeat, it should be noted we have one month left in what is typically a 3-month long volatility cycle where price and volatility surge after bitcoin has dipped into the aforementioned pocket.


  • Notwithstanding uninspiring price action in Sept. and bitcoin sitting well below its Dec. 2017 all-time high, many believe bitcoin’s underlying fundamentals are still not reflected in its underlying spot price.
  • For instance, the 7-day moving average of bitcoin’s hash rate has only been trending higher since 2019. Bitcoin’s ongoing ability to draw in incremental computational power and thus become increasingly secure suggests that demand is strong and is likely to remain so despite remaining -50% off from its all-time high.
  • Furthermore, note that although the price of bitcoin is only just short of $11,000, a level last seen in 2Q2020 and 1Q2019, the 7-day moving average of daily active addresses roared to a multi-year high in Sept. and has only grown since March. This discrepancy suggests that price has yet to reflect bitcoin’s underlying utility and ever increasing demand.


  • When looking at bitcoin wallets across time, one will find that growth in the number of addresses containing between 1,000 and 10,000 ($10.7M – $107M) has yet to slow – a trend unique to this tranche.
  • Not only has the number of addresses grown, but so has the total number of coins held in wallets containing between 1,000 and 10,000. As of Sept. 30, approximately 28% of all outstanding bitcoins sit in these wallets and ₿310,000 ($3.3B) have been accumulated by said “smart money” market participants since Mar. 1.
  • The ever growing number of addresses and coins held in said addresses indicates that new and existing whales have yet to take their foot off the break and cease what has been a 7-month accumulation spree. Both trends seem to suggest that “smart money” demand remains alive & well.

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