Market Wrap: Bitcoin Falls on Lower Volume and Decreased Volatility

BTC's "average true range" shows that markets have become calm.

AccessTimeIconAug 4, 2022 at 8:32 p.m. UTC
Updated May 11, 2023 at 4:56 p.m. UTC
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Bitcoin’s (BTC) price fell 4% on Thursday, and it is testing the trend line illustrated in Wednesday’s Market Wrap, as it dropped below $23,000 in early morning trading.

Ether (ETH) declined 3% to below $1,600. BTC and ETH appear to be in a short-term downward trend, as they both have shown seven consecutive negative candles.

This article originally appeared in Market Wrap, CoinDesk’s daily newsletter diving into what happened in today's crypto markets. Subscribe to get it in your inbox every day.

In traditional markets, the S&P 500 and Dow Jones Industrial Average fell 0.1% and 0.3%, respectively. The Nasdaq Composite Index increased 0.4%. In commodity markets, West Texas Intermediate crude oil was down 2.6%, and the price of spot gold rose 1.9%.

On the altcoin front, solana (SOL) fell 4%, and polygon (MATIC) declined 1.8%.

Bitcoin (BTC): $22,498 −4.3%

Ether (ETH): $1,592 −4.3%

S&P 500 daily close: 4,148.63 −0.2%

Gold: $1,809 per troy ounce +2.9%

Ten-year Treasury yield daily close: 2.68% −0.07


Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.

BTC's price grinds lower, while volatility declines as well

Bitcoin's price registered a seventh consecutive negative candle on the daily price chart, and both volume and volatility are have been declining. With each of the most recent declines, the daily volume fell short of its 20-period moving average.

As mentioned previously in Market Wrap, volume often serves as a proxy for the level of conviction behind the direction of an asset's price. When volume is persistently below its moving average, that can signal that both bullish and bearish investors are reluctant to add to their positions.

BTC’s price has fallen below its 50-day moving average, while the RSI (relative strength index), has declined to 49.8, signaling that bitcoin's price momentum is now neutral.

Volatility has been in decline for both bitcoin and ether, as the "average true range" (ATR) for BTC and ETH has declined 46% and 25% respectively. ATR is a market volatility indicator that measures the difference between the high price, closing price and low price of an asset over time.

An expansion of an asset’s ATR indicates increased volatility, and the contraction of ATR implies reduced volatility. While both BTC and ETH have registered successive declines in price, those declines have been muted in the aggregate as a result of lower volatility.

The average true range for BTC has been declining since June 19, demonstrating a contraction in volatility for the largest cryptocurrency by market cap.

The daily price chart for BTC, along with RSI and average true range metrics (Glenn Williams Jr./TradingView)
The daily price chart for BTC, along with RSI and average true range metrics (Glenn Williams Jr./TradingView)

Initial jobless claims increase

On the macroeconomic front, the Labor Department reported that initial jobless claims for the week ended July 30 increased by 6,000 to 260,000, surpassing estimates of 259,000. Initial jobless claims from the prior week were revised down to 254,000 from the original estimate of 256,000.

Continuing jobless claims increased to 1.4 million, compared with analysts’ forecast of 1.37 million, while the prior week’s figure for continuing jobless claims was revised up slightly to 1.37 million, from 1.36 million. Such economic news weighs heavily on risky assets like cryptocurrencies and stocks.

Some on-chain analytics metrics imply that BTC is undervalued.

A number of on-chain indicators are signaling that BTC is undervalued. Specifically, the “market capitalization to realized capitalization," or MVRV, metric implies that BTC prices are near a bottom.

MVRV isn't a timing mechanism as much as it is a valuation metric, and so investors are prone to use it to determine where prices are rather than what action they should take as a result.

Historically, values that exceed 3.7 have coincided with market tops, where values less than 1.0 have coincided with market bottoms. The current MVRV score for BTC is 1.05 indicating that bitcoin prices are still near undervalued levels.

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Altcoin roundup

  • Meta Confirms NFT Rollout: The social media giant has started to roll out non-fungible tokens (NFT) after integrating with Coinbase Wallet and Dapper. Following a series of testing phases, NFT integration is now live on Instagram across 100 countries. Read more here.
  • Dtravel Completes First Smart-Contract Vacation Rental Booking: A customer booked a $2,000 USDC stay through a property owner who listed his home through the BNB chain-based company’s V2 of its pilot program. After months of reworking its product and user experience, the Web3 platform is building out its site with greater autonomy for both renters and hosts. Read more here.

Relevant insight

Other markets

Biggest Gainers

There are no gainers in CoinDesk 20 today.

Biggest Losers

Asset Ticker Returns DACS Sector
Polkadot DOT −5.0% Smart Contract Platform
Terra LUNA −4.9% Smart Contract Platform
Solana SOL −4.5% Smart Contract Platform

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

Disclosure

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The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.

Glenn Williams

Glenn C Williams Jr, CMT is a Crypto Markets Analyst with an initial background in traditional finance. His experience includes research and analysis of individual cryptocurrencies, defi protocols, and crypto-based funds. He owns BTC, ETH, UNI, DOT, MATIC, and AVAX

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Jimmy is a CoinDesk markets reporter.


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