It has now been a month since the FTX affair shook up the crypto market, a fundamental black swan that has spread its full wingspan to create a black hole in the trust of the ecosystem . 30 days later, calm has returned but beware, the historical volatility of Bitcoin (BTC) is close to a long-term low.
Institutional participation remains stable during the platform audit phase
D+30! It has now been 30 days and 20 trading sessions since the last bearish shock occurred in the cryptocurrency market. and over this period, prices have stabilized in an astonishing way. The downward shock took place over 2 sessions before giving way to the new theme of fundamental concern, the financial audit of the main crypto players.
Investors are therefore still giving the ecosystem a chance to demonstrate its ability to align with the audit standards of traditional finance.. Cryptos have been considered an asset class in their own right since 2018/2020, but they have never been considered equal to other markets (stocks, bonds, credit, forex) due to a lack regulation/transparency.
The crypto market has entered a fundamental new streak of its young existence and it begins with proof of reservesthe first step before considering in the coming months an in-depth accounting audit by the sector’s world leaders.
Binance seems to be doing well in terms of volume of reserves and diversification, in any case, this forces all platforms to play the game of this new transparency requirement requested by institutional investors.
Moreover, the latter have been patient for a month, with a stabilization or even a (very) slight increase in their exposure. To track overall institutional participation in the crypto market, I recommend the asset under management (AUM) barometer of the world’s largest Bitcoin ETF, that of the issuer Proshares and its famous BITO (this is the mnemonic code of the product).
AUM peaked at nearly $1.5 billion and is now stable around $570 million. The end of the bear market will be first indicated by a bullish reversal in institutional participation, at the current stage they are waiting to see.
Figure 1: Chart that exposes the AUM of the Proshares BITO ETF
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Attention, the measurement of the historical volatility of Bitcoin arrives on a support of extreme dimension
A near-technical certainty popped into my mind this week: the next crypto market lag will be before christmas.
This shift will have a magnitude of several thousand dollars and will either be the final purge at $10,000 or the signal to end the bear market with a strong breach of chartist resistance.
This conviction, I hold it from the chartist analysis applied to the curve of the historical volatility at 7 days of the price of Bitcoin (see the graph below). The volatility of Bitcoin has indeed just broken its support at the end of last October, it is a signal of continuation of the downward trend in volatility, which has completely crashed since the downward shock at the beginning of the month. of November.
The all-time low in BTC volatility is now in sight, a level that will create a strong vol bounce, with some past occurrences like the 2018 drop from $6,000 to $3,000, the rise from $4,000 to $10,000 in 2019 or the increase from $10,000 to $70,000 in 2020.
The Bitcoin price will therefore make its technical choice over the next two weeks and the movement will be very impulsive..
Figure 2: 7-day historical volatility in weekly Bitcoin price data
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Sources: Figure 1: Ycharts.com Figure 2: TradingView
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Vincent Ganne is a market strategist, technical analyst, trainer on the stock market and speaker on BFM Business. With a long experience in the field of analysis, he offers a global approach to financial markets. Both from a macroeconomic point of view and from a microeconomic point of view. Vincent Ganne also uses many aspects of chart analysis with the aim of forecasting trends in financial assets over the medium and long term.
Vincent Gane
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