Does History Suggest Price Volatility for BTC Ahead?

🌅 Welcome!

FTX US and its founder Sam Bankman-Fried are the subject of an investigation by a securities regulator, following the bankruptcy case of Voyager Digital. When will we be able to put this year of contagion behind us?

The world’s second largest payment processor will help banks offer crypto, we take a look at the price volatility of BTC and our Research team looks at the current state of crypto markets.

This is the Delphi Daily. Let’s dive in.

🚨 In Case You Missed It

• FTX US and its founder Sam Bankman-Fried are under investigation by Texas’ securities regulator.
• Mastercard is launching a program to help banks offer crypto trading to their clients.
• Crypto broker NYDIG lays off one-third of its workforce.
• Magic Eden  moves its NFT marketplace to an optional royalty model.

📊 Does History Suggest Price Volatility for BTC Ahead?

• The BitMEX 30-day Historical Volatility Index, also known as the BVOL Index, measures the rolling 30-day annualized volatility of Bitcoin. More specifically, this index utilizes the time-weighted average price (TWAP) of BTC/USD on a daily basis.
• High BVOL values indicate increased price volatility for BTC. Historically, when the BVOL falls below 25, a major spike in BTC price volatility tends to follow. As of Oct. 17, the BVOL sits at 19.72, the lowest reading since Jul. 2020.
• The previous three times the BVOL fell below 25, BTC experienced substantial price movements: (i) a 50% crash in late 2018, (ii) a 240% move upward in the spring of 2019, and (iii) the initial move which kickstarted the bull run of 2021.
• Furthermore, BTC’s open-interest leverage ratio currently sits at historic highs while its volatility has recently diverged from that of the VIX. Both of these developments further suggest that a large move is brewing in crypto land.

⚡ Monthly Chartbook – Falling Out of the Merge

• Has anything changed on the macro front given that we are in what we’ve described as a macro driven bear market? This month, the answer is…not really.
• The Fed remains hawkish, once again reiterating its desire to curb inflation at all cost. To quote Fed Chairman Powell, “To accomplish that [bring inflation back down to 2%], we think we’ll need… a period of growth below trend and also some softening in labor market conditions to foster a better balance between demand and supply and the labor market.”
• The DXY remains strong, consolidating beneath its recent highs as other central banks struggle to maintain financial stability within their own jurisdictions.
• The labor market is showing signs of stubbornness, with the most recent nonfarm payrolls coming in hotter than expected, adding fuel to the narrative of “sticky high inflation for longer.”
• The picture for BTC remains relatively unchanged from prior reports such as Searching for Market Bottoms and Bear Market Woes; When Is Enough, Enough?
• We have continued to stress that BTC and crypto markets have not yet decorrelated from macro events, and until there is evidence of this, the framework for analyzing BTC remains consistent.
• For more on the current state of crypto markets, Delphi members can read our Delphi Pro report here.

🐣 Notable Tweets

Understanding Crypto Trading Volume

Meet the simple mathematical formulas responsible for tens of trillions of dollars in crypto trading volume

1/n

– Amanda (@amanda0x) Oct 15, 2022

On Trading

Days like today are a good way to determine how little edge you have in this market.

You wake up to a 400bps swing in traditional indices and see coins rip 5%+ in either direction.

Get a grip, stop gambling.

Short thread

(1/x)

– Zaheer (@SplitCapital) Oct 14, 2022