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Crypto volatility and three assets to watch

Crypto volatility and the trading ranges for Bitcoin, Ethereum and the Crypto 10 Index.

Financial markets remain volatile. However, despite being considered a risky and high-beta asset, crypto-assets have proven relatively stable lately. In this week’s Crypto Verse, we take a look at the drop in volatility across crypto assets, and the trading range within three major markets are fluctuating within.

What’s happening with crypto volatility?

Investors are well aware of the volatility gripping financial markets. Inflation at multi-decade highs is backing central banks into a corner. Monetary policy is tightening rapidly, especially in the United States. Interest rates are rising, with market pricing implying a peak in the Federal Funds Rate of 5% at some point in 2022.

The Fed’s balance sheet is also shrinking and causing another major source of uncertainty for market participants.

A look at the US Volatility Index reveals the level of fear in equity markets. It remains elevated and fluctuateing around 30. Historically, Wall Street moves higher when the gauge is below 20.

Source: TradingView

Even more remarkable is the volatility in the bond market. The US Move Index - the VIX for the bond market - is at even more elevated levels. It’s fluctuating around 150, which to put into context, is around the levels it hit at the start of the pandemic when markets were suffering a liquidity crisis.

Source: TradingView

Meanwhile, crypto volatility – as expressed through the Crypto Volatility Index – is moving in the opposite direction. While there have been bigger break-outs in crypto volatility this year, in the last few months, volatility has trended lower.

Source: Crypto Volatility Index

The phenomenon can be seen in Bitcoin’s historical volatility too. It hit a four-year low last week.

Source: TradingView

Three crypto-assets to watch

Another technical measure that can be used to assess a market’s volatility is its average true range. Investopedia explains how the indicator is built:

"The true range indicator is taken as the greatest of the following: current high less the current low; the absolute value of the current high less the previous close; and the absolute value of the current low less the previous close. The ATR is then a moving average, generally using 14 days, of the true ranges."

Using this indicator, along with typical price action, we can get a gauge on the recent price movement across several crypto assets.

  • Bitcoin

Bitcoin’s price has been remarkably range-bound over the past month. As we have discussed in the past, the crypto’s previous all-time has acted as strong support. When looking at its ATR, it is also remarkably low. By this metric, Bitcoin volatility is as low as it has been since November 2020.

When looking at support and resistance levels, the top end of Bitcoin’s range appears to be around $20,300 and the bottom appears to be around $18,000.

Source: IG
  • Ether

Ether’s price has also been very range-bound recently. In addition to that, it’s looking slightly more constructive from a technical point of view. The RSI is showing slightly strong momentum while the price is above the year-to-date lows. Like Bitcoin, the Average True Range is close to multi-year lows.

The top end of its current range is around $1400 and the bottom is around $1200.

Source: IG
  • Crypto 10 Index

As we have covered here in the past, the Crypto 10 Index is an index built around the 10 most highly traded crypto assets. Like Bitcoin, the index’s ATR is at its lowest since November 2020. And like Ether, its price is above its year-to-date lows.

The top of the Crypto 10 Index’s short-term range is around 7100, and the bottom of it is around 6000.

Source: IG

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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