In its weekly on-chain report, analytics provider Glassnode warned that there is likely to be a big step forward for BTC after a period of low volume and volatility.
“Due to extremely low volatility, and narrow trading ranges of late, this equilibrium will soon be disrupted,” it said.
Bitcoin jumped 4% on the news that the US government reached an agreement on the debt ceiling. However, that move was not enough to break it out of a tight, bound channel it has been trading in for the past few weeks.
With prices tight, and the volatility spring coiled, the #Bitcoin market looks more ready to move from the current equilibrium. While Long-Term Holder spending is slightly higher, we present a series of on-chain tools to help navigate the easy way forward.… pic.twitter.com/GsHqUZFfiO
– glassnode (@glassnode) May 29, 2023
Bitcoin Volatility at Historical Lows
Additionally, BTC has started to pull back from a small flurry of activity. Glassnode confirmed that digital assets and commodities are now experiencing their second upward trend correction of the year. It also observed a tighter correlation between the two asset classes in 2023.
The report revealed that the Monthly Realized Volatility decreased to 34%, “which is below the 1-standard deviation Bollinger Band,” it said.
Less than 20% of historical market activity has seen such low volatility, “so expectations of high volatility in the near term are a reasonable conclusion.”
In addition, transfer rates remain low, which is related to low exchange flows. The recent activity of the exchange decreased -27.3% compared to the last six months, it was observed.
“Low volatility, and reduced on-chain activity all point to some sort of equilibrium phase.”
The Net Unrealized Profit/Loss (NUPL) metric confirms this with a reading of 0.29 which is the lower bound of the equilibrium phase. A break below 0.25 would indicate that the market’s profit has declined back into the capitulation and recovery phase.
“The market seems to have little gravity pulling it in either direction at the moment,” Glassnode concluded.
BTC Price Outlook
BTC prices retreated 0.7% on the day as the asset cools off from Monday’s high above $28,000. As a result, BTC has fallen back to trade at $27,775 at the time of writing.
Current support is at $27,200, with further support below $26,600. There could be more pain in the short term if the expected volatility results in another downward move, continuing the trend that started in mid-April.
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