The crisis in the markets is uninterrupted during the expansion of the Covid-19 pandemic. Meanwhile, the market for cryptosystems is experiencing a moment of low confidence. Volatility has skyrocketed and investors are looking to mitigate the risk by moving into safer assets. That is shown in a study published this Sunday, March 15, by the firm TokenInsight.
In the aforementioned text, analysts rely on data about derivatives to establish an “insightful picture of the current state of the market.” According to their findings, the market “is still in a stage of risk reduction, low confidence and high volatility.
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The analysis firm TokenInsight warns volatility on the market could continue to cause damage
According to the firm, “the market has not yet shaken off the panic”. In that context, the study concluded, liquidity has not yet recovered to a normal level. In other words, volatility could continue to wreak havoc.
On the one hand, the firm assured that the recent fall in prices and the decrease in open interest (open futures positions) indicate a downward trend in the short term. In this scenario, investors would be forced to liquidate their positions, added TokenInsight. This is what happened recently at BitMEX, where investors liquidated up to $700 million.
Similarly, following option market data in cases such as the bitcoin futures and options exchange Deribit, the analysis firm found that “the market is in a stage of extreme uncertainty along with extremely high volatility.”
Among the patterns of behavior, analysts found the possibility of a 23% rise in the price of Bitcoin to a range close to $7,500 between June and September this year. In contrast, the short term shows a lot of distrust, with a percentage of probability of reaching that price at only 13%.
Of the data analyzed by TokenInsight, the way in which the implied volatility of Bitcoin increased in the last month, compared to a wider range of three months, stands out. In the latter range, volatility peaked at 122%, with 89% on average. But in one month, that peak even reached 182%, with the average reaching 95%.
The Coronavirus breakthrough has taken a toll on the cryptocurrency market
Bitcoin started the year with a strong position on the market. In the face of the halving of mining rewards, the expected halving, scheduled for May, Bitcoin had its best January in the last 7 years. In that first month of the year, the price of BTC had a rebound of more than 32%. With that increase, it surpassed $9,500 after starting 2020 with $7,174.
In that context, however, Bitcoin’s performance so far this year was not close to other cryptosystems in the market, which also started the year strong. By the end of February, BTC’s 23.20% return on investment (ROI) was the second lowest of the top 20 cryptosystems by market capitalization.
However, constant news of the coronavirus outbreak in China and its subsequent spread worldwide has taken its toll on the cryptocurrency market, which has collapsed, as have traditional markets. The fall was so big that Bitcoin has been positioned below its “fair value”, a metric developed by Coin Metrics, which contrasts market capitalization and effective capitalization.
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First published in CRIPTONOTICIAS, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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