Bitcoin Price Treads Water as Market Eyes Maturity
Bitcoin’s price hovered within a narrow range on Sunday, as plunging trade volumes kept rally caps in check following a rocky end to the previous week.
The bitcoin price fluctuated within a $70 range on Sunday, reaching a high of $6,399.30 on Bitfinex. At the time of writing, BTC/USD was valued at $6,368 for a gain of 0.6%.
Narrow price action was accompanied by a sharp drop in trading volumes, with market turnover approaching the lowest level of the year. Over the last 24 hours, bitcoin’s trade volume on exchanges has declined by 25% to $3 billion, according to CoinMarketCap. That represents roughly one-third of total market turnover. BitMEX, a derivatives market, processed 16% on bitcoin’s trade volumes on Sunday. Bithumb saw nearly 5% of the daily turnover.
Since falling to the low $6,200 range on Thursday, bitcoin’s price has been slowly tracking upwards. A firm price bottom near $6,000 suggests that the path of least resistance is higher in the short term.
At current prices, bitcoin has a total capitalization of $109.2 billion, accounting for 54% of the entire market. The combined market value of all digital currencies is holding steady above $202 billion, based on latest available data.
Bitcoin Market Maturing
Despite the recent bout of selling pressure, bitcoin has established a fundamentally sound price floor and is exhibiting significantly less volatility than previous market cycles. This is not only corroborated by the bitcoin volatility index, which is currently tracking near yearly lows, but in earlier research published in a high-profile journal called Chaos: An Interdisciplinary Journal of Nonlinear Science.
In a study titled “Bitcoin market route to maturity? Evidence from return fluctuations, temporal correlations, and multiscaling effects,” Polish researchers examined bitcoin’s price action over a six-year period. Although they spotted irregularities early on, the researchers concluded that bitcoin’s “rates of return fluctuated according to the inverse cubic law,” which is a method of analyzing a market’s maturity. This means cryptoassets like bitcoin are increasingly behaving like mature markets such as stocks, commodities and fiat currency.
Bitcoin’s maturity was “particularly evident in the last six months of the examined period” between November 2017 and April 2018. As Hacked previously reported, the launch of bitcoin futures last December has had a stabilizing impact on the market despite arguments to the contrary by the Atlanta Federal Reserve and others.
Against this backdrop, it is reasonable to assume that bitcoin’s price action will show a greater tendency of following established technical patterns now that the market has a longer historical precedent. While this could mean lower prices for longer, a maturing and stabilizing market is positive in the long run.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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