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Analyst Darius Dale: If Low Bitcoin Volatility Comes After Crypto Crash, You’re In New Crypto Bear Market

Analyst Darius Dale: If Low Bitcoin Volatility Comes After Crypto Crash, You’re In New Crypto Bear Market

Darius Dale

Analyst Darius Dale: If Low Bitcoin Volatility Comes After Crypto Crash, You’re In New Crypto Bear Market Photo: 42macro.com

To say bitcoin is volatile would be an understatement. So far this year, the world’s largest cryptocurrency has seen wide fluctuations — with all-time highs and sudden dips. The future of bitcoin is difficult to predict, but analyst Darius Dale said that if the crypto crash is followed by low bitcoin volatility, there will be a new crypto bear market.

Dale is the founder and CEO of 42 Macro, macro risk manager at 42 Capital Management, and a former managing director of Hedgeye Risk Management.

Bitcoin has experienced 14 down days in May alone, according to Coin Metrics. So far this year, there have been 39 days with daily swings of 5 percent or more in either direction, CNBC reported. Others have been trying to read the bitcoin signs as well. 

“The first half of 2021 has so far offered some significant opportunities for bitcoin bears to be wrong,” Coin Desk reported.

A recent bitcoin drop of 27.5 percent in less than two weeks pushed the cryptocurrency into bear market territory. A bear market usually comes into play when prices drop by 20 percent or more. Bitcoin has fallen into the bear territory more than once this year but it doesn’t tend to stay there long and its price typically recoveres quickly from the dip.

Bitcoin hit a record high of $64,829 in mid-April. Today, the cryptocurrency was trading at $38,012.60.

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With bitcoin trading in or near a band between $50,000 and $60,000 since mid-February, the crypto could be in for a “long, cool spring of modest new all-time highs followed by sudden dips,” Coin Desk reported.

Dale’s company, 42 Macro, tweeted, “#Bitcoin is bearish but surprisingly flashing a bullish divergence in volatility. Assuming price stays broken, a breakdown in 10-day realized vol (which is + correlated to price) < 60 would cement this as the start of a lasting “bear cycle” for the crypto asset class.”

Dale elaborated in a separate tweet, writing, “In lay terms: a big reset lower in volatility would be the death knell for this crypto cycle if price doesn’t recover in the face of that. Our time series analysis shows all of #Bitcoin’s low-vol periods have been during extended bear markets.”

Others seemed to agree with Dale’s dire prediction.

“There is something unsettling about a precipitous price drop met with a drop in volitility,” Pierre @PHfloor tweeted.

Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?

Bitcoin’s fluctuations came amid increased regulatory scrutiny in the U.S. and abroad. The U.S. Federal Reserve is expected to release a paper outlining its own research into the central bank digital currency area. 

“Bitcoin remains comically volatile,” Adam Crisafulli, founder of Vital Knowledge, told CNBC. “The economic utility of nothing shifts this rapidly.”