• The crash was a reflection of the market’s insecurity that spot Bitcoin ETF approvals in the United States might not be immediate.
• The historical drop in BTC’s volatility has preceded violent moves in either direction.

Bitcoin [BTC] sank below $26,000 on 18 August, as the long-awaited volatility continued to bring more tears than cheers for a big chunk of market participants. The tumultuous week ended on a sad note for the bulls, with the king’s coin price plunging by more than 11% since the start of the week, data from CoinMarketCap revealed.

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The sudden dip caused mayhem in the market, severely impacting investors’ portfolios. Experts and watchers began to look into the various circumstances that led to the rout. A recent investigation by digital asset investment firm CoinShares touched upon a few crypto-specific and macroeconomic triggers that contributed to the turn of events.

Low volatility makes market vulnerable

Bitcoin’s volatility has fallen sharply in recent weeks, comparable to historically low levels recorded in the late 2022 and early 2023 market. As evident from the graph below, such levels have invariably preceded big price fluctuations in either direction.

Furthermore, Bitcoin trading volumes on centralized exchanges have steadily declined over the recent weeks. The daily average volume has hovered in the range of $2 billion- $3 billion, compared to the yearly average of $7 billion and the 2022 daily average of $11 billion.

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Author: Aniket Verma

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