Bitcoin price surpassed $30,000 for the first time in April after a multi-month downtrend. This momentum points to some strong shifts in key metrics. So, is it the right time to buy BTC? Let’s take a look at what the metrics say…
What does volatility say about Bitcoin?
Investors typically approach Bitcoin as a short-term and speculative asset. But this situation is changing. Bitcoin is actually seeing some of the lowest volatility since 2020. Bitcoin’s 90-day volatility is down 50% from its highs during the 2021 bull market rally. What this means in practical terms is that most of the risk of huge intraday zigzags is gone. As of mid-June, Bitcoin had seen no more than 6% daily movement for more than 70 consecutive trading sessions.
There are a number of possible explanations for this. The first is that more investors are choosing to buy Bitcoin as a long-term investment. In fact, the monthly trading volume in Bitcoin has dropped a lot. At the same time, Bitcoin is now held in personal wallets rather than exchanges. This is typically a sign that investors are choosing the long term. Currently, the amount of BTC traded on exchanges is at its lowest point since January 2018.
Bitcoin’s correlation with other assets
The correlation between bitcoin and gold is increasing, largely as a result of the recent economic turbulence. As a result of the bank failures at the beginning of the year, the constant worry about inflation and recession, and the widespread feeling that something is not right in the US economy, investors are starting to treat Bitcoin like gold once again. In short, they see it as a safe store of value, just like physical gold.
At the same time, the correlation between Bitcoin and the tech-heavy Nasdaq is at a 17-month low. In short, BTC is no longer traded like a fast-growing tech stock. This is actually big news. At the end of 2022, Goldman Sachs claimed that gold is a superior investment for portfolio diversification purposes, as Bitcoin trades like a fast-growing technology stock. So, if the correlations here are shifting, BTC may be regaining some of its appeal from a portfolio diversification perspective.
Market dominance
Finally, there is the Bitcoin dominance metric, which compares Bitcoin’s market cap to the total market cap of the crypto market. This metric is rising again and is now over 50%, meaning Bitcoin’s market cap is now more than half the market cap of the entire crypto market. This is the highest level in the last two years.
Putting it all together, the changes in these three metrics suggest that Bitcoin could become a more attractive investment for long-term buy-and-hold investors. However, the moves of large institutions towards BTC are also of great importance. For example, BlackRock has applied for a new spot Bitcoin exchange-traded fund (ETF), which will be the first of its kind. As Cryptokoin.com reported, the BTC price has been rising since this date.
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