By Lisa Pauline Mattackal and Medha Singh
(Reuters) – These are tense times for bitcoin investors. Show. Wait. Don’t take the first step.
The finicky cryptocurrency has been exceptionally quiet for the past four weeks, trading between $28,452 and $25,800. Even the end of the US debt ceiling saga did little to boost risk appetite.
Bitcoin’s volatility index is near 64, well below the 2023 peak of 116.5 hit in January, according to CryptoCompare. Overall daily cryptocurrency spot trading volumes — above $20 billion for most of the year — have stalled at around $10.6 billion to $12 billion for the past two weeks, the data shows. by The Block.
The data signals a reluctance among investors and traders to take cash or derivatives positions, said Noelle Acheson, an economist who has tracked the crypto sector for seven years.
This was echoed by Matthew Weller, global head of research at financial services group StoneX. “Looking at the bitcoin chart, traders are waiting for a definite break from the $27,000 level which has magnetically driven prices steadily lower,” he said.
The world’s largest cryptocurrency is still the best performing asset of 2023, with gains of around 62%. Still, it has slipped almost 14% from a high of $31,035 in April, leaving nervous traders guessing its next move.
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“The lack of anything interesting is also interesting,” said Luuk Strijers, trading director of derivatives exchange Deribit.
Bitcoin’s 7- and 30-day implied volatility — options traders’ expectations of future price turbulence — slipped to January lows below 40%, after peaking at 76% and 67% in March, according to The Block.
“If implied volatility falls to low levels, it can’t go much lower,” Strijers added. “Trading volatility, buying options in the absence of price movement, that’s what people could do in this market.”
Market positioning indicates that the maximum pain level for the June 2023 option expiry for bitcoin is around $24,000, which could act as a support or resistance level, according to Bitfinex analysts.
“Traders should be prepared for potential market turbulence and short-term price swings in the second half of the month,” they said.
Longer term, in 2024, they expect bitcoin to halve — a technical adjustment that reduces the rate at which new coins are created — and the US election to increase volatility.
THE BULLS ARE HIDING
Funding rates, which measure the cost of holding bitcoin via futures contracts, fell slightly, indicating that investors are less willing to pay to go long. It last traded at 0.0098%, well below the 0.0302% seen in March.
“A bull market is easy, when everything is going up,” said Thomas Kralow, crypto hedge fund manager at Kralow Capital. “But it’s markets like these where people are losing money – because of false beliefs that we’re finally turning the corner, which is incredibly hard to predict.”
He added, “Right now, with volatility declining, we have a few trades that we are open to hedging in case bitcoin drops to $20,000.”
(Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru; Editing by Pravin Char)