According to this week’s Bitfinex report, Bitcoin (BTC) may soon say goodbye to its low volatility.
But what does this mean and what repercussions could it have in the crypto market?
Let’s look at a price analysis below.
An analysis of a possible price change in Bitcoin (BTC)
According to Bitfinex, compared to the period encompassing 2022 and early 2023, there has been a significant increase in isolated high volatility events.
Moreover, analysis of on-chain activity continues to suggest that this trend toward higher volatility is likely to persist and intensify in the coming months. It is worth noting that daily short liquidations recently reached their highest level since 17 October, crossing the $187 million threshold.
Specifically, this scenario leads one to consider that we may be at the conclusion of one of the longest lasting periods of low volatility in Bitcoin‘s history.
Currently, Bitcoin (BTC) is trading above 24-hour average volatility levels based on a 200-day window. Should this trend persist, it would indicate an increase in both volatility based on isolated events and average daily volatility.
Also worth mentioning is the fact that Bitcoin has crossed the significant $30,000 level twice this week, removing a considerable amount of leverage from the futures market.
In addition, although implied volatility (IV) declined slightly toward the end of the week, it still remains above historical volatility (HV) at 43.4%, while HV itself fell to 30.9% toward the end of the week.
Optimistic sentiment among options traders and the implications of short liquidations
Moreover, again according to Bitfinex, the current put/call ratio stands at around 0.41, clearly indicating more bullish sentiment among options traders.
Meanwhile, daily short liquidations have reached the figure of $136 million. In relation to these dynamics, some Bitfinex analysts stated the following:
“This is the second high volatility event for the asset since the monthly open and was driven by spot Bitcoin ETF news, which was later found to be untrue.. Bitcoin briefly surged from $28,000 to $30,000 on Monday, October 16th fueled by unconfirmed chatter about the SEC’s approval of BlackRock’s iShares Bitcoin ETF application.
However, as doubts over the authenticity of the rumour grew, Bitcoin fell back to the $28,000 mark, resulting in a rapid 7.5 percent price swing within minutes. This led to both long and short liquidations where the total short liquidations for the day were the highest since August 17th at over $136 million.”
MicroStrategy and it profits from investments in Bitcoin
Recently, MicroStrategy, the largest Bitcoin holder, has accumulated unrealized gains of more than $100 million from its position in Bitcoin.
Going back to the lows below $16,000, MicroStrategy’s executive chairman, Michael Saylor, received some criticism for his company’s Bitcoin investment, which was loss-making at the time.
However, after about eleven months, MicroStrategy’s Bitcoin investment began to pay off.
According to the International Business Times, when the price of Bitcoin exceeded $30,000, the unrealized gains amounted to about $174 million, with MicroStrategy and its subsidiaries holding an average of 158,245 BTC, equivalent to about $4.82 billion at the current price.
To provide precise figures from MicroStrategy’s September regulatory filing, the entire 158,245 Bitcoin stake was acquired for about $4.68 billion, with an average price of about $29,582 per Bitcoin.
In addition, MicroStrategy’s last significant acquisition of Bitcoin occurred in September, when the company invested an additional $147 million.
This development follows statements by Michael Saylor in early August of this year, when he said:
“Our goal is to accumulate as much Bitcoin as possible on behalf of our shareholders.”
Moreover, given the more than 200% increase in MicroStrategy’s share price during that period, Saylor suggested that a potential share sale could be used to purchase additional Bitcoin.
In conclusion, with the price of Bitcoin reaching a new local high of around $31,000 early Monday and MicroStrategy shares stabilizing at $348, the future looks promising for Michael Saylor and his company ahead of 2024.