Bitcoin (BTC) has been facing a prolonged period of consolidation and low volatility, which has left traders feeling anxious. Despite a notable gain of 19.5% in a week that pushed BTC past the $30,000 resistance level 40 days ago, the cryptocurrency has struggled to break the $31,000 mark. This lack of upward momentum has caused traders’ sentiment to worsen, with their anxiety increasing.
Historically, Bitcoin has experienced much higher volatility than its current levels. The 33% annualized 50-day volatility for BTC is the lowest it has been in the past six months. This contrasts with the 60% or higher volatility that was observed for 245 days during 2022. The decrease in volatility has made some traders uneasy, as they are used to larger price swings.
To compare, other top assets like Tesla (TSLA) and NVidia (NVDA) have much higher volatility than Bitcoin. Tesla’s annualized volatility stands at 58%, while NVidia has consistently demonstrated volatility of 70% or higher throughout 2021. These figures put Bitcoin’s current volatility into perspective, highlighting its relative stability.
However, volatility alone does not determine investors’ excitement or lack of interest in an asset. Other metrics, such as market share and dominance, can provide valuable insights. Recently, Bitcoin’s market share dropped to 49.5% of the total crypto capitalization, the lowest level since June 16. This decline in dominance can be partially attributed to a favorable legal decision for altcoin Ripple Labs, which reduced regulatory risks for alternative cryptocurrencies. This shift marks a change from the gains Bitcoin had seen in its dominance from December 2022 to June 2023.
Another concerning metric is Bitcoin’s 1-year active supply, which represents the sum of unique BTC transacted in the past 12 months. As of July 26, this supply reached its lowest level since February 2016, standing at 6.0 million BTC. The decreasing number of Bitcoin moved on-chain raises concerns, particularly as the potential approval of spot ETFs in the U.S. looms. The use of the Lightning Network as an alternative solution might have mitigated this decrease, but the network’s low Total Value Locked (TVL) and stagnant number of nodes does not instill confidence.
Bitcoin options traders are also showing less confidence in the cryptocurrency’s price. The 25% delta skew, a metric used to gauge fear and greed in Bitcoin options, suggests that bulls are becoming less confident over time. A reading above 7% indicates anticipation of a price drop, while excitement typically yields a -7% skew. Currently, the 30-day metric remains flat at 1%, signaling a balanced demand between call options and protective puts, indicating a neutral market. However, compared to the discount on neutral-to-bearish put options seen between June 19 and July 29, there is a decreased appetite among bulls. This supports the notion that traders have become less confident since the $29,500 support level broke.
With worsening sentiment among investors and various indicators pointing to increased tension, Bitcoin’s price is under mounting pressure in the near term. The declining dominance, lackluster network activity, and concerns in the options markets all contribute to the potential negative impact on Bitcoin’s price. On a positive note, if traders remain cautious and expect further downward movement, the likelihood of excessive liquidations among leverage traders is reduced.
It is important to note that this article provides general information and should not be taken as legal or investment advice. The views expressed here are the author’s alone and do not necessarily reflect the views of Cointelegraph.
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