Bitcoin Bores Traders as Volume Declines on Price Stability

Charles Bovaird
Apr 8, 2016 at 21:13 UTC
Updated Jun 23, 2016 at 01:14 UTC
feature

Markets Weekly is a weekly column analyzing price movements in the global digital currency markets, and the technology’s use case as an asset class.

boring, bored

Bitcoin spent most of the seven days ending 8th April fluctuating between $415 and $425 amid modest trading volume.

These developments largely mirrored the previous week, with the exception of the fact bitcoin experienced weaker trading volume compared to the last several weeks.

Some market experts sought to explain bitcoin’s relative price stability by asserting that low volatility has sapped the interest of many traders. George Samman, a blockchain advisor and consultant, told CoinDesk that bitcoin’s volatility has fallen to its lowest since 2012, and that as a result, “volume has dried up” and lies far below both its 52-day and 52-week moving average.

“I still believe it’s the calm before the storm,” he stated, adding that this is “pretty much a no trade zone.”

Zane Tackett, director of community and product development at Bitfinex, struck a similar tone by telling CoinDesk that “there’s a lot of watching and waiting”, and that as a result, “things are pretty calm.”

He spoke to the major challenges facing bitcoin, stating that people are mostly “wondering how scaling will pan out” and “whether or not the SegWit soft-fork is deployed smoothly and on time”.

Others pointed to seasonal factors. For example, many traders have been on holiday because of Easter in the West and the Qing Ming holiday in China, Arthur Hayes, co-founder and CEO of BitMEX, told CoinDesk.

Price movements

During the seven-day period through 8th April at 12:00 UTC, the price bitcoin climbed from $415.42 to $421.07, CoinDesk Bitcoin Price Index (BPI) data reveals.

This represents a modest increase of 1.4%. The digital currency did experience some notable fluctuations during the week, surging from $415.73 at 21:00 UTC on 1st April to $420.25 at 01:00 UTC on 8th April.

But, bitcoin then traded largely between $417.50 and $420 until 02:00 UTC on 5th April, before fluctuating between $420 and $422.50 for the rest of the week.

The digital currency stayed within this tight range as market participants traded more than 8m BTC during the seven days through 8th April at 17:00 UTC. This figure was a pretty far shot from the robust transaction volume of 32m BTC that exchanges logged during the prior week.

Ether still volatile

While bitcoin had a mild week in terms of price movements and trading volume, ether, the native cryptocurrency on the public, Ethereum blockchain experienced sharp fluctuations, falling 14.3% from 0.028 BTC to 0.024 BTC during the seven days through 8th April at 12:00 UTC.

This sharp decline took place when many are trading alternatives to bitcoin due to their volatility, said Hayes. Amid this renewed interest, ether generated 24-hour trading volume of 19,856 BTC during the start of the week and 19,898 BTC at the end.

Christopher Burniske, analyst and blockchain products lead at investment management firm ARK Invest, shed some light on ether’s future price movements by reviewing the technicals.

“Ether broke through triple bottom support that it had developed since March 20th, around .0235 bitcoin/ether,” he stated, citing Poloniex data. “If it doesn’t reverse the downward trend it may retrace all the way back to .020, where it experienced high volume on March 18th, which led to a strong price bounce at the time.”

Bitcoin’s rising legitimacy

While bitcoin’s relative price stability has been helping generate visibility for ether, several market experts asserted that this lack of volatility could help bitcoin garner greater legitimacy.

“Up to a year ago, the volatility of bitcoin was a huge topic,” Tim Enneking, chairman of Crypto Currency Fund, a digital currency-focused hedge fund, told CoinDesk. He added that, “If you take a step back and look at bitcoin from a lifecycle standpoint, the currency is experiencing record-setting stability.”

Enneking said:

“If you look back at certain of the criticisms which some have levied against bitcoin as a currency, one was that it was too unstable.”

If that argument carries water, “bitcoin is coming closer to being considered a legitimate currency,” he said.

While Enneking spoke to how greater stability may be making bitcoin more valid, another expert asserted that its lack of volatility is helping show the digital currency’s fair price.

“Continued price stability shows that bitcoin is priced at fair value despite lower levels of speculative trading,” Joe Lee, founder of bitcoin derivatives trading platform Magnr, told CoinDesk, adding:

“A reduction in price volatility will allow for growth in Bitcoin’s utilitarian use cases to shine.

Charles L. Bovaird II is a financial writer and consultant with strong knowledge of securities markets and investing concepts.

Follow Charles Bovaird on Twitter here.

Tower of blocks image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.