Last month, the annualized volatility of Bitcoin broke a 9-month downtrend, shared cryptocurrency exchange Kraken in its latest report.
On March 12th, the price of Bitcoin dropped 39% marking the second-worst day in BTC’s history. However, this crash was alongside the equities market, S&P 500 plunged 9.5%. This sell-off started after the spreading coronavirus pandemic was declared a pandemic by the WHO.
Bitcoin has been actually following the S&P 500 for the better part of 2020 and this fall and the recovery the digital asset is seeing has its 30-day correlation with the equity market peaking.
Bitcoin’s poor performance basically can be explained by the weakness in the US stock market and the market participants chasing volatility in traditional markets, reads the report.
The price movement of Bitcoin last month has its annualized volatility climbing to 178%, making it the most volatile March ever and overall the 8th most volatile month since January 2011.
Bitcoin repeated history in March by under performing February for the 6th time in a row. This was also the second worst March ever.
However, good things might be ahead as historically April has posted positive 53% returns on average and the highest median return of +27%. Going as far back as 2011, April has been the second best performing month for bitcoin.
However, not just in terms of returns but April also records high volatility, even more so than what we saw last month. As per the data, Kraken states this month sees an average 48% more volatility than March, this means an implied annualized volatility of 263%.
Usually the most volatile month, April has an average monthly annualized volatility of 102%.
In March, the drop in Bitcoin price resulted in miners getting unprofitable; this resulted in the hash rate of the network falling by 45%. Hash rate closed the month 20% lower. This resulted in squeezing out the unprofitable miners from the market.
“Miner exits would result in the liquidation of assets, bitcoin included. Bitcoin’s halving in May could exacerbate this dynamic should price fail to trend higher.”
Yesterday, Bitcoin’s fork Bitcoin Cash had its halving which didn’t have much impact on the market and today is BCH’s for BSV’s halving, over a month before Bitcoin’s block reward gets cut in half to 6.25 BTC.
But before the halving next month, there are a number of “upcoming notable catalysts” pointed out by Kraken such as US Reports Weekly Jobless Claims, US Federal Open Market Committee Minutes, Monetary Policy Meetings of ECB and Bank of Japan Monetary Policy Meeting, and China Reports Gross Domestic Product (GDP) that we need to watch out for.
The market also needs to watch for a recession, heightened volatility in the traditional market, growing unemployment, worsening credit conditions, falling asset values, illiquidity, and also fear that could “drive cash-strapped market participants to sell bitcoin.”
However, it needs to be pointed out that despite the extreme sell-off, long term bitcoin holders have been unphased, with over 58% of the BTC supply not moved in more than a year.