Each month, Kraken publishes a report analyzing the volatility of Bitcoin and other Crypto assets. These reports are first shared with the exchange’s VIP clients before being shared publicly.
The latest report covers a “A New Wave” for Crypto in January, as well as historical volatility trends and correlations to gold and other traditional markets.
Key Report Takeaways
- A Santa Claus rally rolled over into Jan. and pushed BTC and many altcoins to an all-time high; while BTC rallied just short of $42,000, profit-taking sent BTC falling as much as -32% intramonth before finishing Jan. up +14%.
- While BTC posted a fourth consecutive month of gains, it vastly underperformed the altcoins (+64%). Of the large cap altcoins, LINK was the best performing with a monthly return of +101% and a Sharpe ratio of 10.5. Decentralized Finance (DeFi) was the best performing vertical with a remarkable +145% return and a Sharpe ratio of 20.3.
- For a third month, news headlines were littered with outspoken support from well-established institutional investors and corporates; JPMorgan said BTC could surge to $146K, Bill Miller said corporate cash could fuel a BTC “torrent,” BlackRock authorized two of its funds to invest in BTC, and Ray Dalio called BTC “one hell of an invention.”
- BTC’s correlation with risk-on assets was virtually unchanged MoM, a potential cause for concern given the recent influx of retail demand, further government stimulus, corporate sentiment sitting at a 16-year high, and stretched stock
- BTC’s bull market support, its 20-week exponential moving average and 21-week simple moving average, appears to be approaching $30,000. Such suggests that the odds of falling below $30,000 are likely to diminish as Feb. concludes.
- An abnormal +18% monthly increase in subscribers to the r/Bitcoin subreddit indicates that BTC is in the hyper growth phase of bringing in a new cohort of adopters.
- Aggressive BTC accumulation ($3B), particularly following BTC’s blow-off top from $42,000, by whales indicates that if demand can hold steady, outsized demand could drive price meaningfully higher.
Whales Gonna Whale
- For a third straight month, the number of coins in addresses with a balance greater than ₿100 (“whales”) exploded higher even in the face of BTC’s -32% intra-month correction.
- As a matter of fact, BTC “whales” capitalized on BTC’s correction as an opportunity for further accumulation; the number of coins held by whales stood at ₿11.5M on Jan. 8 when BTC hit an all-time high of $41,989, but grew to an all- time high of ₿11.56M as BTC corrected down to ~$30,000 on Jan. 27.
- Meanwhile, those holding fewer than ₿100 (“minnows”) continued selling into BTC’s strength and even accelerated profit-taking after BTC topped out at $41,989. Coins held by minnows dropped ₿37,200 ($1.23B) to a 9-month low of ₿5.3M between BTC’s all-time high set on Jan. 8 and Jan. 27.
- The incremental ₿93,000 ($3.08B) accumulated by whales last month suggests that demand from those with deep pockets remains sound irrespective of BTC’s sharp sell-off.
- Should demand from whales hold steady and interest from minnows rally, outsized demand from both segments could drive price meaningfully higher as supply fails to keep pace.