Will Bitcoin’s low volatility help push prices beyond $27k?

  • Low volatility could prove to be a good advantage for Bitcoin.
  • Spot buyers seemed prepared to give BTC a much-needed push, and derivatives players were not left out as well.

Bitcoin’s [BTC] volatility has remained low over the last three months, causing the king coin to consolidate between $25,000 and $26,000. Interestingly, at press time, BTC was back above $27,000. 

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This increase triggered a good level of cheer among market participants.

Don’t write off BTC yet

On 18 September, Halving Cycles creator CryptoCon opined that low volatility did not entirely push BTC out of bullish territory. He, however, mentioned that the drop to $25,000 was similar to 2015, when Bitcoin returned to its lows.

Using the annual realized volatility, CryptoCon concluded that the decrease in volatility would end up being bullish for Bitcoin again. For context, the annual realized volatility measures what happened in the past. It also acts as a standard deviation of returns from the mean return of a market.

High values of the metric indicate high risk in the market. However, the annual realized volatility was very low at the time of writing, meaning BTC had a high chance of increasing.

Moreover, investors who buy even around $27,000 might be buying at a much lower value compared to the price the coin might hit in the near future.  

Armed and ready for big bets

It also seemed that traders shared the same sentiment as the analyst. This was revealed by the Estimated Leverage Ratio (ELR). The ELR shows how much leverage is used by users on average by dividing the Open Interest by the coin reserve.

An increase in the ELR indicates that investors are talking about high leverage derivate trades. On the other hand, a decrease implies caution in betting on the asset. From CryptoQuant’s data, the ELR had fallen since 14 August. 

Bitcoin estimated leverage ratio

Source: CryptoQuant

But at press time, the metric was back in the upward direction. This was confirmation of traders’ bias in increasing BTC-related contracts.

Away from the derivatives market, another metric to consider is the Stablecoin Supply Ratio (SSR). At least, this metric would help determine the sentiment around the spot market.

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By definition, SSR is the ratio of a coin’s market cap relative to the aggregate market cap of all stablecoin. High values of SSR mean high selling pressure and a potential price decrease.

Meanwhile, low values of the SSR imply potential buying pressure and possible price rise. At press time, Bitcoin’s SSR was very low at 7.55. This meant that investors were equipped with enough stablecoins to buy BTC, and subsequently, the coin may rise well above $27,000 soon.

Bitcoin stablecoin supply ratio

Source: CryptoQuant

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