Bitcoin Volatility Recedes as Bear Market Reaches 411 Days
Bitcoin’s trading range continued to narrow on Saturday, as the leading digital currency endured its longest bear market in history.
From peak to trough, bitcoin’s price fluctuated within a $34 range on Saturday, according to aggregate data provided by CoinMarketCap. At the time of writing, bitcoin was averaging $3,478.58, where it was little changed compared with 24 hours ago.
On individual exchanges, BTC/USD fluctuated between $3,420 on Bittrex and $3,511 on Bitfinex.
Trading volumes have declined over the past 24 hours, from $5.5 billion to $5 billion. BitMEX remains the largest exchange for bitcoin transactions, accounting for 11.6% of total volume.
From a technical standpoint, bitcoin remains in a firm downward spiral, as evidenced by price action and the leading momentum indicators. It continues to trade below a vital long-term support that, if not reclaimed, will open the door to a re-test of the December low. Read from Jan. 11: Bitcoin Approaches “GTFO” Level.
Bitcoin’s 30-day volatility index has declined substantially over the past three weeks, signaling relative calm in the cryptocurrency market. As of Friday, the 30-day volatility index was estimated at 2.64%, according to bitvol.info. It was as high as 5.98% on Dec. 18.
The indicator tracks the extent to which bitcoin’s price varies over the past 30 days.
As we’ve seen recently, tight trading ranges rarely translate into sustained rallies. This should put traders on high alert for another potential pullback in the near term.
Longest Bear Market in History
On Saturday, bitcoin officially crossed the threshold for longest bear market in history. At 411 days, the 2018-19 bear market has exceeded that of 2013-15, when bitcoin lost a staggering 93%.
Bitcoin’s year-long downtrend follows a period of unprecedented growth for cryptocurrencies. Investor elation and the fear of missing out caused bitcoin to spike to nearly $20,000 in December 2017. Just two months later, the cryptocurrency market as a whole found itself in the trenches as the ICO bubble began to burst. From peak to trough, cryptoassets lost a staggering $740 billion.
Despite multiple aggressive selloffs over the past 12 months, the crypto market is stronger today than it was during the last bear trend, according to Pantera Capital CEO Dan Morehead. In a recent interview with Laura Shina’s podcast, Unconfirmed, Morehead said the “underlying fundamentals are much, much stronger” today than they were in in 2014-15.
Pantera’s crypto investments earned a staggering 10,000% between 2013 and 2018. The firm employs a long-term strategy for investing in cryptocurrencies. According to Morehead, this avoids getting “wrapped up in the cycles of the price action.”
Back when bitcoin was trading at $104, Morehead sent the following email to potential investors:
“In my opinion, it’s like deciding whether to buy Microsoft back in the day at $0.20 a share. It was hard to do when the stock was just at $0.10. In the fullness of time…clearly a great trade. I believe bitcoin right now is just like that. The world’s first global currency since gold and the world’s only borderless payments system (frictionless to boot) at a market cap of $3bn?”
Against this backdrop, Morehead believes a five-to-ten year outlook is warranted when investing in cryptocurrencies. Investors who adopt this frame of reference are more likely to succeed in the long term.
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.
Featured image courtesy of Shutterstock.