Bitcoin in step-down price behavior again, as low volatility spooks interest

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Updated: 13 December 2019

Bitcoin is having one of those monotonous runs that dampens the spirits of even the most ardent supporter. For example, a week back, BTC was at $7,200 and change. It quickly jumped to $7,500 or so, and then in the following few days it has dropped about $100 a day, which unfortunately brings out every pessimist and skeptic to wax on that Bitcoin is headed much lower than anyone believes. Hopefully, Bitcoin’s fortunes will improve over the weekend, but for now, every investor sentiment gauge is “soft”.

There are no perfect barometers of investor sentiment, but we are told by the experts, who know a thing or two, that, at this early period in the life of Bitcoin, market pricing is totally dependent upon investor sentiment at a given moment, and investor sentiment is also tied to the prevailing narrative for the world’s favorite digital asset. According to Crypto Briefing, CoinList president Andy Bromberg noted: “The overall crypto markets have a tendency to be event-driven, and in the past few months there hasn’t been news to send prices moving meaningfully.” In the absence of news, the narrative deteriorates.

There are also seasonal issues at play. The investment community, investors included, tends to party down hard during these year-ending weeks. For those that are anticipating large yearend bonuses, they will be checked out until sometime next year. If there is a focus on the investor front, it is about reviewing one’s portfolio, deciding which losers should be dispensed with, and then doing whatever it takes to minimize tax liabilities for the year. Crypto assets tend to be a small part of the equation, but tax issues do exist.

Although it has been repeated many times before, Bitcoin and the crypto world of altcoins have been in a general descent since the end of June. On most measures of crypto, aka Bitcoin, interest has been on a descent as well. Here is one favorite depiction of one of these measures:

The concern, as can be easily discerned with the naked eye, is that “interest” peaked last June and is now at levels that were witnessed at the end of Crypto Winter and during the first quarter of this year. As the analyst community began to claim that a real bottom had formed in early December, confidence slowly returned, until the April breakout occurred. The second quarter did excite the crypto faithful, but conservatives in the bunch claimed the ensuing run up was a present value discounting of next year’s halving event. We will not re-open that debate here. The debate is, however, raging.

As for the construction of the above chart, a common measurement criteria for “interest” has been to track Google search volumes for Bitcoin related phrases. Crypto Briefing staff remarked that: “Yearly Google searches for ‘Bitcoin’ peaked at the end of June, at a value of 100. They have been steadily falling since. Today, Bitcoin searches measured 23. They were last seen in the low 20s ranges in March, bottoming at 20. A value of 100 represents the peak popularity for the period, with 50 indicating the search term is half as popular and zero suggesting insufficient data.”

Similar charts exist for Google searches for sites like CoinMarketCap.com, for example, but the more advanced attempts view indicia like Tweet volumes and system related statistics to arrive at their sentiment measures. Firms like TheTie and Sentix have proprietary algorithms that combine a multitude of measures to arrive at a daily figure. In each of these cases, the story is the same as above – a peak in June, followed by a gradual decline. Obviously, these different systems correlate well with Bitcoin pricing history, but none are showing any positive signs for the future at the moment.

And so, we wait until an event sparks interest or the narrative starts to change. Two things are, however, givens. Volatility is low, but it will not last forever. A breakout will come, and its strength will depend on how long volatility was next to nothing. Direction will be the big unknown. Secondly, the number of articles about Bitcoin’s May 2020 halving event will begin to pick up steam again after the first of the year. If anything, awareness should pick up and interest, too. Until then, relax, and enjoy the holidays!