Bitcoin price volatility declined in June, falling to its lowest in four months as the cryptocurrency’s markets experienced relative calm.
While the world’s most prominent digital currency enjoyed some notable gains, rising roughly 10% on June 1, it traded primarily between $9,000 and $10,000 during the month, CoinDesk figures show.
As a result, bitcoin’s annualized 30-day volatility reached 45.60% on June 30, the least since February 18, according to data supplied by Blockforce Capital.[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
‘Wait And See’
“I think investors generally took a wait and see approach with BTC during June,” said Michael Conn, CEO of Singapore-based fund Zilliqa Capital.
He emphasized that it was “a month with widespread social and Corona related headlines taking center stage globally.”
Many analysts predicted that bitcoin prices would rally after the digital asset underwent a so-called halving on May 11, at which point the rate of new supply was reduced by 50%.
However, these gains have not yet materialized, as the cryptocurrency’s price has failed to enjoy sharp gains following the event.
John Todaro, director of digital currency research for TradeBlock, described the situation as unsurprising.
“Most of the expectation regarding a price rise from the halving, is expected later on and not immediately following the halving—given that to an extent some of this was priced into bitcoin prior to the actual event taking place,” he stated.
It’s “similar to the record price rise in 2017, when bitcoin hit an all-time high—this record run-up took a year after the 2016 halving,” added Todaro.
Jake Yocom-Piatt, project lead for Decred, also weighed in, stating that “bitcoin prices will surely rise as a result of the halving supply shock, but it is always a question of when.”
“Miners that are struggling financially due to the halving will capitulate and the mining market will consolidate further, likely leading to less selling from the miners that remain,” he stated.
“Even for miners who are struggling and capitulating, the amount of bitcoin they are selling is necessarily reduced, so it is simply a matter of time until this erodes the sell side of the market,” Yocom-Piatt predicted.
“For the moment, the sell side of the market is driven by speculators, but this can only go on for so long.”
However, other analysts threw cold water on the halving’s bullish impact, with Jeff Dorman, chief investment officer of asset manager Arca, basically describing it as a non-event and stating that it wouldn’t have “any impact on price,” at least in the short-term.
Jesse Proudman, CEO of crypto hedge fund Strix Leviathan, provided a skeptical assessment, stating that:
“Our research suggests that the impact of cryptocurrency halving events are indiscernible from broader market sentiment and that may be true here again in the case of Bitcoin.”
Grayscale Bitcoin Trust
The Grayscale Bitcoin Trust, an investment vehicle with more than $3 billion in assets under management (AUM) at the end of June, has been aggressively purchasing units of the digital currency.
The trust’s total AUM rose by more than $100 million last month, climbing from $3.37 billion on May 29 to $3.54 billion on June 30, according to figures provided by Grayscale.
Several analysts commented on this development, with many interpreting it as a signal that digital assets are increasingly drawing institutional investors.
“Grayscale now has more than $4 billion in digital currency assets under management spread across its investment trusts,” said Todaro.
“This number has grown materially over the past several months and a majority of it is in bitcoin,” he stated.
“Yes, institutional interest is growing and there is a multitude of evidence for this ranging from Grayscale’s AUM to increased derivatives trading activity at the CME, as well as new bitcoin fund launches.”
Proudman also weighed in, stating that “the size and scale of Grayscale’s Bitcoin offering cannot be ignored and may serve as a useful indicator of speculative interest in the asset.”
Calm Before The Storm?
While volatility was very low in June, periods like that have frequently foreshadowed significant price gains, Dorman noted.
“The last two times we saw volatility this low, the market ultimately reacted violently (March/April 2019, right before a single day 25% BTC gain and Nov 2018, right before a 50% BTC decline),” he stated.
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether and EOS.