Market Wrap: Higher Volatility Expected in Bitcoin and Ether

Cryptocurrencies were mostly lower on Wednesday as bitcoin traded in a tight range around $56,000. Technical indicators suggest downside is limited around the $53,000 support level, which could keep buyers active toward $60,000 resistance.

Trading volume is expected to decline over the next few days, especially on the U.S. Thanksgiving holiday Thursday. Still, some analysts expect volatility to increase in the bitcoin and ether options market as November comes to a close.

Rising volatility could cause sharp price moves over the next few days, which could discourage buyers from holding onto positions for an extended period.

In observance of the U.S. Thanksgiving holiday, Market Wrap will return on Monday, November 29.

Latest prices

Bitcoin (BTC): $57,420, -0.65%
Ether (ETH): $4,271, -2.51%
S&P 500: $4,701, +0.23%
Gold: $1,788, -0.12%
10-year Treasury yield closed at 1.63%

“The market as a whole will stay rangebound in the short term. BTC has failed above $60K a few times and it will take some doing to break through that level,” Pankaj Balani, CEO of Delta Exchange, a crypto derivatives trading platform, wrote in an email to CoinDesk.

“We should expect downward pressure and higher volatility on all risky assets including BTC, but $1 trillion market capitalization level (currently around $53K BTC) should hold as a good support for bitcoin in the short term,” Balani wrote.

Prepare for higher volatility

Some analysts expect an increase in bitcoin and ether options volatility, which means sharp price movements could occur over the next few days.

Bitcoin’s daily implied volatility has declined since May and could be set for a near-term rise from relatively low levels. “Unlike traditional equities markets, where price volatility generally occurs to the downside, bitcoin can express significant price volatility in both directions due to leveraged perpetual futures trading,” crypto asset manager Two Prime wrote in a report earlier this week.

Additionally, “with bitcoin leverage ratios still relatively high, further price declines could set off a cascade of liquidations which could see bitcoin rapidly test its 100-day moving average (currently around $53K BTC),” Two Prime wrote.

Similar to bitcoin, ether’s volatility has also trended lower, albeit with greater swings. This is likely due to more speculative interest in the options market for ETH relative to BTC.

As shown in the chart above, “when implied volatility (options market expectations of future volatility) is substantially higher than realized volatility (the actual price fluctuation during past trading ranges), an increase in the latter is usually around the corner and long volatility options positions pay exponential returns,” Two Prime wrote.

Altcoin roundup

SHIB slumps as large holders take profits: Shiba inu, the self-proclaimed “dogecoin killer,” may still have its passionate following but it was in the red again Wednesday following three consecutive weeks of losses. Blockchain data showed the loss followed profit-taking by large SHIB token holders, as the crypto market moved to risk-off mode, a situation when traders reduce their exposure to riskier assets.
eToro to limit ADA and TRX for U.S. customers; coin prices fall: Trading platform eToro will be limiting the crypto assets of Cardano (ADA) and Tron (TRX) for U.S. customers starting in December due to “business-related considerations in the evolving regulatory environment,” according to a statement on eToro’s website. At one point after the announcement was published ADA prices dropped by more than 6%. At press time, TRX was down 2.4%.
Metaverse platform The Sandbox’s SAND token surges 25%: The bullish move in SAND, the native cryptocurrency of the blockchain-based virtual world The Sandbox, gathered steam after a tweet by Adidas, a German sporting goods manufacturing giant, seemed to confirm a relationship between the two companies. The token hit record highs above 47, taking the weekly gain to 70%, according to CoinDesk data.