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Cryptocurrency

On-Chain Data Shows Heightened Volatility for Bitcoin in Coming Months: Bitfinex



The latest edition of a weekly report from crypto exchange Bitfinex has revealed that bitcoin (BTC) is likely to experience heightened volatility in the coming months.

According to the Bitfinex Alpha Report, the crypto market is currently in one of the longest low-volatility periods in Bitcoin’s history. However, that trend seems to have changed as the asset’s 24-hour volatility recently witnessed a 1,200% spike within nine hours, propelled by its surge past the $30,000 mark and up to $35,000.

“As volatility continues to attempt to sustain beyond historical averages, we are potentially at the end of one of the longest low volatility environments in Bitcoin’s history. Bitcoin is currently trading above its 200-day average 24-hour volatility levels and if this is sustained, it will mean that both isolated event-based volatility and daily average volatility is up,” Bitfinex analysts said.

Heightened Volatility for Bitcoin

In previous editions of the Bitfinex Alpha report within the last two months, analysts at the exchange predicted heightened volatility for BTC in the coming months, and recent events confirmed those predictions.

At one point in August, Bitfinex said crypto traders were bracing themselves for choppy waters ahead due to Bitcoin’s sudden decline after a stagnant period. This was evident in the adjustments they made to their strategies. On-chain indicators like implied volatility outpacing the historical metric further substantiated the traders’ expectations.

While BTC’s brief ascent from $28,000 to $30,000 on October 16 was triggered by unverified news about the U.S. Securities and Exchange Commission approving BlackRock’s spot Bitcoin exchange-traded fund application, the move validated Bitfinex’s forecasts.

On-chain indicators have shown that the market is in a period of volatility, which will grow in the coming months. Upward and downward movement in metrics like the Estimated Leverage Ratio suggests short-term consolidation and a ranging market may occur before more volatility occurs.

Large Short Liquations

Meanwhile, BTC’s surge on October 16 was short-lived, as the asset fell back to the $28,000 mark, causing the largest short liquidations since August 17. While the initial amount liquidated was $136 million, subsequent volatile swings caused $187 million in liquidations across long and short positions.

“Last week’s moves underscore the sensitivity of the crypto market to high volume trades, especially during low liquidity periods. The rapid price movements were not solely due to a short squeeze but were significantly influenced by the market’s immediate response to the spot ETF news,” analysts added.

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