The volatility and difficulty of Bitcoin mining is growing while other metrics give bearish signals

Bitcoin’s realised volatility has peaked since March 2020, when global financial markets, including cryptocurrencies, experienced a rapid collapse. Realised volatility is understood as the average deviation of the rate of an asset over 30 days. Over the past month, the value has risen to 103%.

The observed dynamics is explained by sharp ups and downs in the price of the first cryptocurrency in the period under consideration. After reaching a high of around $42 000, on January 11, Bitcoin experienced the largest decline in its history in dollar terms. Unlike the March events, in this case, the increase in volatility occurs on the bull market, which is characterised by price fluctuations as a result of investors fixing profits.

The higher the volatility of the exchange rate, the greater the magnitude of changes in the price of bitcoin. This is expected in a bullish cycle. At the same time, over longer time periods, there is a decrease in volatility as the market capitalisation increases.

In addition to volatility, the difficulty of Bitcoin mining has also increased. At the last recalculation on Saturday, the value increased by 1.05% to a new record of 20.82 T. It is expected that if the current block addition rate is maintained, the mining difficulty will increase again in two weeks. At the same time, the hash rate is stable at about 150 EH /s.

Meanwhile, the CEO of one of the analytics platform says, his expectations for the short-term behaviour of the Bitcoin market range from neutral to bearish. He notes that the price of bitcoin on the Coinbase exchange is currently not higher than the market average, as well as there is no increased outflow of coins from the trading platform. He notes, that in the past, the activity on Coinbase has served as a reliable indicator of the further direction of the Bitcoin trend.

“I will hold onto bearish expectations until there is a significant overpayment or outflow of coins on Coinbase. BTC needs an inflow of dollars on the spot market from institutional investors to start the next bull run,” he says.

Analysts at another bank believe that difficulties may arise with the influx of new institutional assets into the bitcoin market, which is why the rate is unlikely to rise above $40 000 in the near future.

CEO of Crypto Pi - blockchain powered digital investment platform. Fintech entrepreneur & speaker.