Breaking down volume and volatility on the diehard cryptocurrency
Something beneficial I like to practice as a trader is every so often check in on stock market trends I have previously broken down, as a self-assuring way to measure how my theories have held up. In the second-to-last weekend in February, I mentioned how BTC catapulted above the psychologically significant $50,000 mark, hit a record of $51,735.38, and sported an impressive year-over-year growth of 430%. Now, the enigmatic cryptocurrency hit a record high of $61,781.83 on March 13 and boasts a year-over-year gain of 701%. This week, I want to take a closer look at volume, volatility, and what traders are eyeing for BTC’s next potential move.
Both charts in this article exhibit an important trend worth noting for the cryptocurrency: positive end of year seasonality, or, in simpler terms, an end-of-year surge. This makes sense then, says Schaeffer’s Senior Market Strategist Matthew Timpane, as to why traders are targeting the $100,000 level for BTC. Even further, the currency sports a Fibonacci retracement near 361.8% from its 2018 peak, and a positive seasonality for the remainder of April could push Bitcoin above this mark.
I also wanted to reiterate the point I made in late-February regarding volume and BTC. Specifically, it is easy to notice that BTC’s volume was running eerily similar to Schaeffer’s Volatility Scorecard (SVS), which measures the size of the equity’s movement on the chart in comparison to what options traders were pricing in during the past 12 months. Looking at the most recent activity, the 7-day average volume appears to be rolling over. Regardless, increasing volume has typically pushed the price higher as this really is a simple story of supply and demand when you think about it.
If there’s one concern, it’s that volatility has been slowing, and over the past five years, increased volatility has coincided with increased price appreciation. Previously, it was the opposite — per the top-panel of the chart. So, in turn, when looking at both volatility and volume in comparison to past trend for the virtual currency, we would want to see volume start increasing again if we are expecting the price to push towards 100k.
Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, April 11.