Bitcoin is stuck at current levels, but the market could start moving again before 2023 sets in. The key factors shaping global markets are changing, and cryptocurrencies will undoubtedly follow the general trend in the new year.
At the time of writing, Bitcoin is trading at USD 16,800 with sideways movement in the past 24 hours. At higher timeframes, the cryptocurrency registers a 6% loss. Other assets in the crypto top 10 by market capitalization move along with BTC and record losses during this period.
Bitcoin investors should brace themselves for incoming volatility
Bitcoin and the crypto market are poised for volatile days during the holiday season. From now until the end of the year, the markets will see less trading volume, making assets sensitive to sudden price movements.
According to a report of crypto exchange Bitfinex, the number of active Bitcoin addresses is decreasing. This number shows a downward trend in 2022.
The graph below shows that the number of daily active addresses averaged 921,445 during this period, representing a decrease of 1.1 million compared to 2021. This decrease in activity will contribute to the spike in volatility.
In the last week of the year, activity and trading volume fell more sharply since 2013.
Data since 2013 suggests that there is always a 3-4 percent drop in the number of daily active addresses in the last week of the year compared to the previous month. Aside from the drop in trading volumes, the drop in DAA may also correspond to reduced mining activity, as miner activity matches BTC’s major on-chain movements.
Finding direction for the BTC price
According to the report, one metric is vital to predicting BTC’s direction in the face of higher volatility. This metric is the monthly realized volatility, which measures what has happened in the market over the last 30 days.
This statistic is the lowest since the third quarter of 2022, just before the last bull run. As can be seen in the chart below, each time the monthly realized volatility reached similar levels, Bitcoin price trends went up over the next few months.
The current trend in the market is downward, but many experts have started adjusting their forecasts. Like NewsBTC reported yesterday, another report claims that the long-term bullish case for Bitcoin has strengthened:
(…) the value proposition for bitcoin has only strengthened this year as sovereign currencies around the world show signs of stress and central banks continue to struggle with policy credibility.