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Tag: Volatility

Asia’s Bitcoin Volatility Linked To Algos Tracking ETF Flows

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Recent Bitcoin price volatility in Asia has been closely linked to automated trading algorithms that monitor flows in US exchange-traded funds (ETFs). According to Bloomberg, this algorithmic trading response to daily US ETF flow data is causing pronounced swings in Bitcoin prices during Asian trading hours.

Trading Algos Spoil The Bitcoin Price

The trigger for Bitcoin’s steep decline, marking its worst drop in a month, was observed on Tuesday morning in Asia. This downturn coincided with the release of US ETF flows data, which indicated a net withdrawal of investments.

Shiliang Tang, president of Arbelos Markets, highlighted the impact of algorithmic trading on these market movements. “From an algorithmic trading perspective, bots can basically auto-scrape this data and buy and sell based on this,” Tang explained. “It seems that’s basically what is happening.”

The introduction of several Bitcoin ETFs in the United States on January 11 has since attracted a net $12 billion in investments. These ETFs experienced a surge in inflows, especially in the first half of March, propelling Bitcoin to a record high of $73,798. However, the premier cryptocurrency has seen a decline of up to 17.6% from this peak, amidst fluctuating inflows and outflows within the sector.

This pattern of flows has notably impacted the Asian market’s returns, with February and early March witnessing particularly strong performance, which diminished later in the month. The influence of algorithmic protocols on Bitcoin’s price not only affects the spot market but extends to derivatives as well, with Coinglass reporting about $357 million in bullish crypto bets being liquidated on Tuesday alone.

Charlie Morris, Chief Investment Officer at ByteTree Asset Management, pointed out the significance of ETF flows for Bitcoin compared to gold, noting that 5.5% of Bitcoin is held in ETFs, against 1% for gold. This makes ETF flows a more critical factor for Bitcoin’s market movements.

Market participants like Jakob Kronbichler, co-founder of Clearpool Finance, emphasize the market’s responsiveness to ETF flow data and suggest the recent correction as a natural pause for the market to “take a bit of a breather” amidst widespread excitement.

Spot ETFs Rake In $40 Million

Yesterday, all spot Bitcoin ETFs experienced an inflow totaling $40.3 million, primarily due to Blackrock’s significant contribution of $150.5 million, which played a crucial role in boosting the market. On the contrary, ARK faced a challenging day with $87.9 million in outflows, despite having $200 million inflows the previous week. Grayscale’s GBTC saw rather low outflows, amounting to $81.9 million.

Renowned analyst WhalePanda commented: “Maybe profit taking after Q1? Speculation though. […] Mondays always seem to have the most outflows and wondering if end of Q1 had something to do with it as I suspect. Price crashed further on US government moving/selling some of the BTC from Silk Road. Better to sell here than at $100k or $200k. 17 days until halving.”

At press time, BTC traded at $66,398.

BTC price, 4-hour chart | Source: BTCUSD on TradingView.com

Featured image created with DALL·E, chart from TradingView.com

Disclaimer: The article is provided for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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April 3, 2024
Bitcoin Short Squeeze Revives Trading Volume And Volatility
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After what seems like a thousand years of stability and a slight downtrend, bitcoin is back. Volatility is wreaking havoc. Trading volume seems to be picking up steam. And, more importantly, the community’s morale is climbing up. In any case, what do the data and the on-chain analysis say? Are the numbers high enough to justify the excitement? Let’s explore them.
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BTC price chart for 07/27/2021 on Bitstamp | Source: BTC/USD on TradingView.com
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Trading Volume Is Climbing, But, Is It A Trend?

According to Arcane Research, “On Monday, the daily trading volume in bitcoin reached $9.2 billion, which is the highest daily trading volume in bitcoin recorded since June 22nd.” That could be a good sign of a healthy market making a recovery, but hold your horses. The market had been stagnant for a while, and not only that, before the spike we had “Four consecutive days bellow $3 billion.”

Related Reading | Bitcoin Trading Volume Plunges To Lowest Level Since 2020

Even though $9.2M is a promising number, take into account that “Overall, the 7-day average trading volume remains substantially below its yearly average and trading activity in bitcoin seems to be low so far this summer.” From where we stand, there’s no way of knowing if the market is picking up or if we are witnessing a statistic anomaly. We’ll have to wait and see.
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BTC Daily Volume is rising | Source: Arcane Research
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Volatility Is Back In Action, But, Is It Here To Stay?

Even though traditional finance is afraid of it, the Bitcoin community thrives on volatility. And, again according to Arcane Research, “Yesterday, the markets moved towards the upside, leading the 7-day volatility to climb above the 30-day volatility.” So, volatility is back, but, are we off to the races? Don’t be so sure.

“Last summer, a similar event occurred when bitcoin was consolidating throughout the summer on declining volatility, before seeing a sudden 11% gain on July 27th, 2020. Then, the market corrected back toward the lower end of the consolidation range quickly thereafter and remained within its consolidation range throughout the summer.”

Are we in the same cycle, though? So far, 2021 has been insane for Bitcoin. All the predictions fell through. All the models seem to be failing. And there’s hope. The bull run might be over, but it also might not. And if we are still in the bull run, there’s no point comparing the situation to last summer. We might be in a whole different ball game.
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BTC/ USD Volatility is wreaking havoc | Source: Arcane Research
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The Short Squeeze That Generated This

Everything happened “On Monday, $750 million worth of shorts got liquidated, as bitcoin climbed from $34000 to $39500. This is the largest short squeeze we’ve recorded in bitcoin, surpassing the squeeze amid bitcoin breaking its 2017 ATH on December 16th-17th.” That catastrophic event shifted Bitcoin’s tectonic plates and put volatility, trading volume, and everything in motion. How long will it last, though? That’s the question.

Related Reading | $150 Million In Short Squeeze Liquidated As Bitcoin Scales Above $53,000

About the short squeeze is worth noting that “Binance changed their API following the May 19th crash,” so the numbers might not be precise. In fact, according to Arcane Research, the situation might’ve been “severely underestimated by Bybt. This short squeeze was, therefore, very likely far larger than $750 million.”
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Featured Image by Steve Buissinne from Pixabay - Charts by TradingView
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July 28, 2021
Bitcoin Historical Volatility Fractal Points To Brewing Bullish Explosion
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Bitcoin price has been trapped in a tightening trading range and has barely moved in weeks. The top cryptocurrency by market cap has been boring compared to its characteristically volatile self.

Looking back at the asset’s historic volatility, a fractal pattern could be forming that suggests the price per BTC is about to blast off to unprecedented heights.

Fractals And How History Doesn’t Rhyme But It Often Repeats

Mark Twain said that “history doesn’t repeat, but if often rhymes.” The statement best explains the theory behind repeating price patterns called fractals.

Related Reading | Bitcoin Ready For Display Of Strength, But Which Direction Will It Break

These fractals appear similar to another point in historic price action, and help analysts to predict and anticipate future market behavior. The results can be mixed, as rarely do things play out exactly the same. This fact has earned fractals a negative reputation, however, even in Bitcoin there is some specific behavior that can be expected.

$bitcoin fractal$
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Every cycle looks similar by comparison when zooming out | Source: BLX on TradingView.com
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For example, each major breakout past all-time high resulted in a parabolic uptrend and the visual comparisons are undeniable. The most recent uptrend of which has come to a screeching halt, turning a stumble into a full-on 50% or more collapse.

While the market ponders if the bull trend is kaput, even technicals have become mixed. There is a handful of doji candles on the weekly, a tight trading range, and volatility has dropped to an important level. All of these signs point to a potential reaction, and if “history” has anything to do with it, the volatility should be released to the upside.

What Historical Volatility Says About The Bitcoin Bull Run Finale

All throughout nature there are fractal-like patterns that repeat again and again. Price action in financial assets commonly exhibit such repeating behavior, such as cycling between bear and bull markets.

Bitcoin is no different, and is known for patterns that appear again and again. Looking back at the Historical Volatility indicator on weekly timeframes, we may have one of those instances brewing.

$bitcoin volatility fractal$
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Mid-cycle consolidation then kicks volatility into high gear | Source: BTCUSD on TradingView.com
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During the previous bull market, which is clear the current cycle isn’t quite following in terms of “only up” price action, after one of the largest shakeouts, volatility finally held above a key level and kickstarted the last leg of the bull market.

Anyone who had assumed it was the peak of the cycle, would have been left in the dust as Bitcoin churned out another 900%+ of bull market ROI and volatility went parabolic.

Related Reading | Bitcoin Trend Strength Indicator Suggests Bull Run Isn’t Yet Over

Bitcoin is back and trying to hold above a very similar support line, and if successful, should send volatility back along a parabolic curve along with price action. That would put the top of the current bull cycle at around December, which – historically – has marked a significant top or bottom every year since 2017.

Still think history doesn’t rhyme?

Follow @TonySpilotro on Twitter or via the TonyTrades Telegram. Content is educational and should not be considered investment advice.
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Featured image from iStockPhoto, Charts from TradingView.com
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July 10, 2021