Halving can increase volatility and stimulate price growth

According to a report published by Kraken, Bitcoin price volatility increased significantly in January due to the re-activation of “whales”. The exchange released a report showing that Bitcoin’s monthly volatility index reached 58.2%. This is the highest value recorded in the last 3 months.

Volatility increased as the price of Bitcoin rose from minimum values ​​of nearly $ 6,850 on January 3 to a three-month high of $ 9,570 on January 31.

As prices rise, whales – those buyers of large numbers of coins – seem to have woken up. The number of addresses with balances between 1000 BTC and 10,000 BTC increased in the second half of January, as noted by Kraken researchers.

The addresses of the whales increased from 2,000 to 2,030, marking a shift from the “wait to see” phase to the “accumulation” phase.

Historically, this transition has injected volatility into the bitcoin market. For example, whales began to accumulate coins in September 2018 and entered standby mode in early 2019. Meanwhile, annual volatility dropped below 20% by mid-November and rose to 100% by November. the end of December.

Along similar lines, the increase in price volatility in the second quarter of 2019 was preceded by the accumulation of large portfolios.

“In the accumulation phase, whales consume market liquidity”,

said Ashish Singhal, Co-Founder and CEO of CRUXPay and CoinSwitch.co.

“This affects the supply-demand ratio and causes volatility to return to the market.”

Whales were responsible for the high volatility in the past

Sudden changes in prices were observed during the whale accumulation period. The strong growth of the cryptocurrency from $ 4,100 to $ 5,100, seen on April 2, 2019, was caused by an order worth about $ 100 million distributed over three exchanges.

The action of whales has led to sales of high prices in the past; a bitcoin flash crash from $ 12,600 to $ 12,100 in less than 15 minutes on July 9, 2019, was triggered by a massive 6,500 BTC sale order on the Binance exchange. Last night was a similar flash crash, from $ 10300 to $ 9330.

Singhal added that HODLers – addresses with balances between 10 BTC and 100 BTC – also influence liquidity and volatility. The continuous accumulation by them could take at least a few more weeks, until halving will take place.

Halving can increase volatility and stimulate price growth

Bitcoin rewards will be reduced from 12.5 BTC to 6.25 BTC in about 80 days, May 12. Basically, miners would have fewer bitcoins to sell after May and this could lead to a shortage of supply. Halving can increase volatility and it will!

Thus, if history repeats itself, Bitcoin could increase in this range above the June 2019 high of $ 13,880.

However, this does not necessarily mean that volatility would disappear as whales continued to accumulate coins before half the reward.

“If the whales switch to bitcoin accumulation, while HODLers are still in their current phase, it would suggest a further increase in BTC demand until halving,”

said Connor Abendschein, a crypto research analyst at Digital Assets Data.

“This imbalance has the potential to see not only a peak in volatility, but also price.”