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Kraken Intelligence, our team of in-house research experts, has released its Bitcoin Volatility Report for August 2020.
- A surge in July volatility trickled into August, driving annualized volatility up to an intra-month high of +60% and causing month-over-month volumes to jump +53%.
- Bitcoin remained in range between $10,590 and $12,480 for the month, before finishing up +3% at $11,657. This resulted in the weakest monthly positive return since 2017.
- Bitcoin’s strong, positive correlation with the S&P 500 and gold persisted into August and climbed as high as 0.84 and 0.97 before plunging to -0.02 and 0.25, respectively. The ascension of Bitcoin’s correlation with gold to 0.97 marked an all-time high.
- A rally to an intra-month high of $12,480 coincided with Nasdaq-listed MicroStrategy announcing a $250 million Bitcoin purchase as part of a new “capital allocation strategy,” Berkshire Hathaway purchasing a majority stake in Barrick Gold mining company and gold rallying to an all-time high of $2,075/oz.
- A number of lesser-known market dynamics suggest incremental volatility is likely on the horizon. For example, annualized volatility reverted to the mean after falling as low as 15%, while U.S. equities continued to climb. This coincided with a multi-year low for Bitcoin’s dominance and a record number of BTC remaining untouched for over a year.
What to Watch for Next?
- Negative Returns in September: Historically, September is Bitcoin’s worst-performing month, with an average return of -7%. With Bitcoin underperforming its average monthly returns for most of the year, we could see returns below -7%.
- The Suppressed Pocket: Twelve times in the past, Bitcoin’s annualized volatility bottomed between 15% and 30% before climbing, on average,…