Bitcoin has plunged over 3% to trade below $18,500. At the same time, the total computing power for mining has reached an all-time high, lifting the cost of mining to $19,300. Doing the math, the cost of mining Bitcoin is now higher than its current price, inducing more miners to sell BTC and adding further to selling pressure for the king crypto.
Bitcoin has been behaving like tech stocks since the early days of the pandemic, although its volatility was greater than the tech-heavy Nasdaq. After reaching a peak of $69,000 in November 2021, Bitcoin has fallen over 51% so far this year. The Nasdaq's action was similar. It peaked at 16,212 in November, according to MarketSmith, and has fallen more than 30%.
In September, however, volatility in the stock market was higher than in Bitcoin. While the Nasdaq lost 10.5% last month alone, Bitcoin has been trading within a narrow range. The price in recent weeks has been moving sideways between $19,000 and $20,000, but just fell below $18,500.
The low volatility in recent weeks is reflected in the Bitmex Bitcoin volatility index, or BVOL, a time-weighted average price index based on 30-day annualized volatility for Bitcoin. The price is measured in 1-minute intervals for half an hour. BVOL is now below 25, down from over 80 in July.
The tight range signals that Bitcoin may be consolidating before its next big move. It is also trading around a key level because the coin has frequently found support around $20,000. In July the coin rallied after reaching $20,108, as the stock market and the Nasdaq surged in the late summer rally into August.
Low Volatility Leads To Big Move
In the past, BVOL has dropped below 25 just before a huge move in either direction.
On July 13, 2020, the BVOL hit a low of 21.17 and a bull run to Bitcoin's all time high of $67,549.74 followed.
But earlier, when BVOL fell to 16.75 on Nov. 5, 2018, it extended a yearlong plunge. The coin nearly halved its value to trade at $3,244 in a little over a month. Over the year, that was a dive from $15,270 in January 2018. That was a drop of over 70% during the 2018 bear market.
Volatility is a measure of how much price changes from a moving average. Bitcoin tends to make a big move on economic news. Last month's consumer price index, which showed that inflation was still high at 8.3% in August, saw the king crypto plummeting 7% on a single day.
Macro conditions are ripe for a spike this time as well. The CPI report on Thursday came in at 8.2% with prices increasing 0.4% as inflation remains high.
Volatility in Bitcoin will also likely return due to currency markets. The British pound sank to near parity with the U.S. dollar in September, leading to a 1,150% surge in trading volume in Bitcoin in the U.K. in the last week of September.
So What Direction For Bitcoin?
Bitcoin has fallen below $18,500 after this week's CPI numbers.
Bitcoin has also been moving along with the stock market. That means that if a rally does occur, it would also depend on where equities are headed.
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