Bitcoin Is 5-Times Less Volatile at $60,000 Today Than in 2021
Published at Theya Research. Follow Joe on X.
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Cliff-Notes:
- Bitcoin's price has remained rangebound around $60,000 this summer, with reduced leverage and spot buyers now dominating the market.
- The lower volatility and funding rates suggest a more stable market, transitioning $60,000 from a speculative top to a future cycle floor.
- As the Fed faces economic data misses just two weeks out from its first rate cut of the cycle, all eyes are on Thursday and Friday's labor reports.
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Bitcoin has had a very boring summer, that's no secret. We've been rangebound above and below the $60,000 level for 6 months since BTC initially crested it and shot up to all-time highs above $73,000 in March.
The biggest development in market structure during this period is that leverage has dramatically diminished, and spot buyers and sellers are now the dominant force driving bitcoin's day-to-day price.
Here is the perpetual futures funding rate, the rate that longs periodically pay shorts and vice versa to enter a bitcoin futures contract. Look how much longs were paying shorts in late March—the price action was driven primarily by leveraged speculators 6 months ago. 6 months later, you can see that neither longs nor shorts are paying a huge premium to the other, and the rate that they do pay to each other is much, much lower than it was; roughly 1/6th of the size.
With leverage largely out of the picture, spot buyers and sellers are the dominant force in setting the Bitcoin price. As a result, much more stability is present in Bitcoin's current price at ~$60,000 than it was in March at $70,000. Even though this summer has been boring, choppy, downward price action, it has been constructive for Bitcoin's long-term growth trajectory:
Zooming out even further to the last time bitcoin was ranging around $60,000, the same dynamic is present: a much lower peak in the funding rate for perp. futures. From the 2021 cycle to the 2024 cycle, the $60,000 level matured from a blow-off top where speculators drove the price up on a fragile foundation only for the floor to fall out and send bitcoin plummeting 50%, to an area driven mainly by spot buyers where the maximum drawdown (so far) has only been 25%:
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This summer of chop has cleared out lots of speculators for the time being. While bitcoin still has wild swings, they are not nearly as wild as they were at this same price four years ago. BitMEX's 30-day Bitcoin Volatility Index has diminished from its 2021 peak of 133 at $58,000 BTC to its current level of 24.62 at $58,000 BTC—that's a five-fold decrease in volatility over 3 years at the same price level.
It may be boring, but this is the maturation of BTC as an asset in real-time. Prices that were once cycle peaks are now future cycle floors—this is a story that has played out cycle after cycle. $6,000 once served as a relative floor, then $20,000 served as a relative floor, and now the $60,000 level is in the process of shifting away from a blow-off cycle top to a cyclical floor where long-term holders of the asset are comfortable buying more, and holding it:
With the Fed slated to kick off its rate-cutting cycle in 2 weeks, all eyes are on disappointing US labor market data as of recently. This morning's JOLTS data missed expectations by 427k jobs, falling 237k this month after last month's report was revised down by 511k jobs—going from a beat on analyst estimates to a resounding miss. The United States now has the lowest number of job openings since January 2021. Jerome Powell said that any further cooling in the labor market is unwelcome. Today's data paired with data releases in recent weeks show a labor market that is cooling faster than the Fed would like to see it. For a Fed that has so far avoided a "hard landing" wherein the labor market turns over and the unemployment rate spikes, decision-making has never been more tense.
Tomorrow and Friday will be critical junctures for the economic data in the Fed's decision-making two weeks from now at the September FOMC. If these two labor prints for the month of August continue the trend of missing expectations and cooling more than expected, we could see the Fed raise its cutting cadence from an inoffensive and relaxed 25-bps clip to a more aggressive and supportive 50-bps clip. Markets are starting to price in the fact that it may get hairy for the US economy if the Fed flips from maintenance mode into panic mode. I'll write more about this on Friday once the data is in.
Final thought: if you don't hold your Bitcoin in a self-custody wallet, you don't own any Bitcoin.
Take it easy,
Joe Consorti
Theya is the world's simplest Bitcoin self-custody solution. With our modular multi-sig vaults, you decide how to hold your keys.
Whether you want all your keys offline, shared custody with trusted contacts, or robust mobile vaults across multiple iPhones, it's Your Keys, Your Bitcoin.