Delving into Bitcoin, the digital currency giant has been experiencing restricted fluctuations within a historically defined 60-day price range. Analysis of past patterns suggests significant volatility follows such phases of price compression. This discussion throws a spotlight on Bitcoin’s current market status and what future scenarios could unfold from it.
Examining Bitcoin’s Price Movement and Supply in a Limited Scope
Leading on-chain analytics company, Glassnode, has presented an illuminating perspective on Bitcoin’s recent price behaviour. According to the data demonstrated in their chart, Bitcoin’s price has stayed within a remarkably narrow range, with few instances of such a tight scope in its history.
The chart depicts past instances when Bitcoin’s 60-day price range was more constricted than the current one, measured by percentage fluctuations. This visualization emphasizes the restrained price activity that Bitcoin has been experiencing lately.
Intriguingly, these episodes of intense price compression led to extremely volatile periods for Bitcoin. Hence, it can be conjectured that the recent sluggish phase might culminate in a substantial swing in cryptocurrency values. Despite the volatility release following such compressed periods not always being favourable, notable crashes like that of November 2019, which signaled the end of the bear cycle, followed after such periods of inactive price changes.
The constricted price range, however, is not the sole predictor of Bitcoin’s possible volatility. Glassnode indicates that a significant proportion of Bitcoin’s supply is amassed around the current price level.
A crucial on-chain metric, the “Realized Supply Density,” measures the percentage of the asset’s supply last purchased within a specified range surrounding Bitcoin’s existing value. Glassnode’s selected 15% range indicates the portion of the supply last moved within +15% – -15% from the latest price.
Historically, the Realized Supply Density has demonstrated an interesting pattern. A slow rise corresponds to Bitcoin entering a “volatility building” phase, while a sharp decrease indicates a “volatility release” phase. Presently, from the perspective of this metric, Bitcoin seems to be in the former phase. Approximately 20% of the Bitcoin supply is contained within the ±15% range – a significant figure that suggests the possible heightening of market volatility due to changes in investor profitability, as pointed out by Glassnode.
Bitcoin’s Current Price
At the moment, Bitcoin prices hover around $105,700, marking more than a 5% increase over the past week.
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FAQ: What is ‘Realized Supply Density’?
Realized Supply Density is an on-chain metric that reflects the percentage of an asset’s supply that was most recently purchased within a specified range around its current value. This metric provides insights into the concentration of an asset’s supply in relation to its value.
FAQ: What is meant by volatility in cryptocurrency?
In the context of cryptocurrency, volatility refers to the rapid and significant price movements that cryptocurrencies can experience in both directions. Higher volatility means the price of a cryptocurrency can change rapidly in a short time, making it possible for investors to experience high profits or significant losses.
FAQ: How is the ‘volatility building’ phase identified in Bitcoin?
The ‘volatility building’ phase in Bitcoin can be identified by a gradual increase in the Realized Supply Density. This phase suggests that significant market volatility could be on the horizon.
In conclusion, Bitcoin’s historical price action patterns and Realized Supply Density readings suggest potential volatility in the near future. While these analyses offer valuable insights, the inherently unpredictable nature of the cryptocurrency market necessitates cautious and informed investing. Stay tuned to Finances Zippy for regular updates and informed analysis on Bitcoin and other cryptocurrencies.
