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In its weekly on-chain report, analytics provider Glassnode cautioned that there is likely to be a big move ahead for BTC following a period of low volume and volatility.
“Given the extremely low volatility, and narrow trading ranges of late, it seems this equilibrium is soon to be disturbed,” it noted.
Bitcoin jumped 4% on the news that the U.S. government came to an agreement on the debt ceiling. However, that move wasn’t enough to break it out of a tight, range-bound channel that it has traded within over the past few weeks.
With prices tight, and the volatility spring coiled, the #Bitcoin market looks increasingly ready to move out of the current equilibrium. As Long-Term Holder spending ticks marginally higher, we present a series of on-chain tools to help navigate the volatile road ahead.… pic.twitter.com/GsHqUZFfiO
— glassnode (@glassnode) May 29, 2023
Bitcoin Volatility at Historical Lows
Furthermore, BTC has already begun to fall back from that minor spurt of activity. Glassnode confirmed that both digital assets and commodities were currently experiencing their second uptrend correction of the year. It also observed a tighter correlation between the two asset classes in 2023.
The report revealed that Monthly Realized Volatility has dropped to 34%, “which is below the 1-standard deviation Bollinger Band,” it noted.
Less than 20% of historical market activity has seen such low volatility, “therefore expectations of elevated volatility on the near-term horizon is a logical conclusion.”
Furthermore, transfer volumes remain low, which correlates to low exchange flows. Recent exchange activity has dropped -27.3% relative to the last six months, it observed.
“The lower volatility, and declining on-chain activity all point towards a 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 market profitability has declined back into the capitulation and recovery phase.
“The market seems to have little gravity pulling it in either direction at present,” Glassnode concluded.
BTC Price Outlook
BTC prices have retreated 0.7% on the day as the asset cools from its Monday high of just over $28,000. As a result, BTC has fallen back to trade at $27,775 at the time of writing.
Support currently lies at $27,200, with more support further down at $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.