Bitcoin’s Low Volatility Caused a Decline in Liquidity

Bitcoin’s Low Volatility Caused a Decline in Liquidity

Bitcoin was able to form a consolidation channel at the beginning of May which has become narrow ever since. Its performance is currently sideways from $9k to $9.3k, encountering barrier at this range’s upper boundary.

Bitcoin has failed to come up with any decisive momentum over the previous several days and weeks. Over the previous weekend, the bears tried to take the cryptocurrency asset down to lows of $8.9k but the bulls captured the bearish pressure and returned it to the long-held trading range from $9k to $9.3k.

Over the previous twenty-four hours, the bulls have been attempting to clear the huge barrier close to $9.3k but were unsuccessful. However, this trend led to a fall in Bitcoin’sliquidity.

Glassnode released a report recently, noting that the value of Bitcoin’s liquidity fell over the previous week. That is, a decline in trading and transactional liquidity ensued over the previous week. Nonetheless, Bitcoin is still strong on a fundamental basis due to an increase in its network health and investor sentiment last week.

“Liquidity dropped by 6 points over the past week, losing ground in terms of both trading and transaction liquidity as exchange deposits and on-chain transactions decreased.”

Data from Skew shows that its 10-day volatility is currently at 20 percent. This current volatility level was last observed prior to the huge selloff recorded in November of 2018.

“Bitcoin ten days realized volatility = 20%. Last time we reached that level, we had the great sell-off of November 2018 shortly after”

Seeing both drying liquidity and low volatility could mean the cryptocurrency asset is preparing for huge movement in the coming weeks. Although a look at the asset’s chart shows that periods of exceedingly low volatility are short-lived, the low volatility appears to suggest that a remarkable movement is imminent.


Sudarshan M is a long time crypto-enthusiast. Pulled in by bitcoin early on, it did not take long for Sudarshan to divert all of his academic attention from business studies to blockchain by doing his Masters and eventually pursuing his PhD in the subject.