Cryptocurrency enthusiasts are always on the lookout for signals in the market that could indicate a possible bull or bear run. Recently, a significant shift has taken place in the Bitcoin market that might indeed present an opportunity for optimists, though it’s not without its potential pitfalls.
A notable decline in Bitcoin’s short-term holders coupled with record-low volatility could be signalling an impending bull market. Bitcoin’s historically low volatility levels have led to an exceptionally narrow trading range. This scenario has only happened twice in Bitcoin’s history, bringing traders to speculate whether this teeters on the brink of a significant market movement.
According to the report from Glassnode, the narrow trading range leads to traders making small gains or losses. However, a new price range needs to be established to stimulate fresh investments and potentially increase volatility. While these signs often indicate a bullish future, there’s the other side of the coin to consider.
Low volatility may not necessarily be exclusive to the cryptocurrency market. Other traditional markets such as stocks, oil, bonds and currencies may also display the same trend. Presently, the S&P 500 and oil price 30-day volatility are at their lowest levels since November 2021, possibly suggesting a broader trend that isn’t Bitcoin-specific.
Similarly, Bitcoin investors seem to have grown increasingly weary. The data shows that short-term holders’ price distribution is heavily concentrated between $25,000 and $31,000. This pattern is not foreign and was observed during past bear market recoveries, which potentially indicates we are in a pre-bull run stage.
However, the data also shows that several investors retain positions at a loss, thereby creating short-term selling pressure. The supply from these short-term holders has dropped to a multi-year low, while the supply from long-term holders has reached an all-time high. Certainly, a noteworthy phenomenon suggesting that the strong hands are accumulating Bitcoin, potentially indicating the start of a bull market run.
Nonetheless, all these indicators don’t offer guaranteed outcomes, especially considering the shifting global economic climate. One cannot disregard the potential effect of a global economic recession on Bitcoin’s price. And while we have historical precedents for low volatility and a decrease in short-term holders, the rising US 10-year Treasury yields and surging mortgage rates are new elements in the equation.
With Bitcoin’s journey as a $50 billion asset class being relatively recent, how investors will react in times of stress faced by traditional markets is yet to be seen. Will Bitcoin serve as a hedge against growing inflation or will market tumult lead to a decline in value? Only time will tell. One thing is for sure, with the crypto market as volatile and unpredictable as it has been, investors and observers always need to be prepared for a roller coaster ride.
Source: Cointelegraph
