The Bitcoin price has been acting like a stablecoin recently, and over the past few months has actually had less volatility than the S&P 500 and the Nasdaq. There is certainly no need to panic, although many newbie traders will always fall prey to emotions when prices decline.
— Michael Saylor⚡️ (@saylor) November 6, 2022
There is no need to panic
Given that this has been one of the least volatile periods in Bitcoin’s history, traders who are panicking ought to find something else to do with their money – they won’t be able to stomach the markets when volatility kicks back in.
Long term investors are not panicking. The Bitcoin price has now retraced to where it was two weeks ago, after falling only 5% in the past 24 hours.
Various speculators take different strategies on how they should treat the Bitcoin price moving forward, and one of the most popular ways is to DCA in to accumulate a Bitcoin position.
This strategy means that any volatility can be channeled in one’s favour: one can buy more when the price is low, and is more in profit when the price rises.
Traders lament the low volatility
Many have been left disappointed with the low degree of volatility, especially when one considers the maxim that “volatility is vitality”.
Bitcoin has historically been a highly volatile asset thanks to its relatively low market cap compared with other asset classes, and many hope that the price of Bitcoin will continue to be volatile for a long time.
However, it is worth noting that as assets grow to reach market saturation and maturity, their relative volatility levels do decline somewhat.
Volatility will return
One of the most interesting things about these low periods of volatility is that they are historically marked by ending with extremely large movements to either the upside or the downside.
As the markets relax somewhat, traders tend to add more leverage to their positions in search of the same gains as one could find before without it.
Every bear market has an accumulation phase, such as the one which we are in now, where the volatility drops off a cliff.
This is almost always followed by a sharp shock. In the case of 2020, the sharp shock saw a dramatic decline from $6k to $3k over the space of 24 hours, and many are holding out hope that the same happens this time so that they can buy more Bitcoin cheaply.
Will Bitcoin go to $11k?
In the same way that the decline from $20k to $19k ought not frighten investors, neither should a potential decline from $19k to $11k.
It wouldn’t be particularly out of the ordinary in terms of previous cycles for Bitcoin to decline so significantly, and the current macroeconomic tailwinds could certain permit such a dramatic decline.
Moreover, the ongoing situation unfolding at FTX could also soon be extremely problematic for the markets, with an FTX implosion most likely sending the price significantly lower.
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