The technical picture on the bitcoin chart remains unchanged. Quotes have confirmed the level of 20,700 as resistance, but continue to consolidate in a very narrow range, not consolidating below the psychological mark of $20,000.
Against this background, the forecasts do not change, all previous scenarios of the development of events remain in force.
In the meantime, we will understand why volatility remains so low and what can lead to its increase.
How long will this volatility last
The burning question in the crypto community now is how long this volatility will last, especially as the macroeconomic conditions surrounding the global financial sector continue to deteriorate steadily from 2020.
In this regard, Abdul Gadit, CFO of the automated digital asset trading platform Zignaly, brought to the attention of traders that like it or not, the cryptocurrency market is now deeply connected to the economy of traditional finance (TradFi), and now it begins to follow a similar trajectory.
In his opinion, the reason for the continued price volatility and lack of liquidity is the extreme retail and institutional caution caused by rising inflation and recession pressures. He went on to add that whenever things start to get worse in the economy, investment, especially in crypto finance, starts to slow down.
Gadit added:
"Now the global markets are in the middle of this bear cycle and the crypto industry is becoming increasingly narrow in terms of its trading ranges. This price move could continue for weeks, if not months, unless there are macroeconomic changes in the environment. The likelihood of that is pretty low."
What's next for the cryptocurrency market?
Another crypto expert, Andrew Weiner, highlighted that while the cryptocurrency market is closely linked to US equities, there is still a lot of volatility due to the growing activity in the crypto derivatives segment. However, he believes that the decisive factor determining price action in the digital asset sector, at least for now, is the Ethereum 2.0 merger.
"Following the recent discussions around the merger, the market seems to have fully appreciated its implications. If we look at things in terms of fundamental analysis, the market has stopped falling and is preparing to start recovering."
In support of this claim, Weiner cited research data from his company that showed a total of 19 projects in the Web3 space raised a total of $501.3 million between Aug 8 and Aug 14 alone.
He noted that of that figure, Metaverse, Non-Fungible Tokens (NFT), and GameFi projects have raised $82, while decentralized finance (DeFi), Web3, and infrastructure projects have raised a total of $379.3 million.
Finally, various blockchain firms have been able to raise around $40 million from various venture capital firms. Fundraising activities are active, which is a good sign for the market.
Crypto analyst Charmin Ho emphasized that global markets are experiencing volatility as investors seem to be in disarray after the Federal Reserve's speech at Jackson Hole. She noted that due to the fact that stocks have experienced many ups and downs over the past two weeks, the short-term outlook for the global economy remains rather unclear. Especially since consumers, investors and policy makers seem to disagree on whether the US is in recession or not and the Fed is keeping inflation under control.
"The main event related to the movement of the price is the merger of Ethereum. Some participants, mostly miners who will not be able to continue their operations on the chain after the merger, plan to leave the Ethereum blockchain with proof of work in the hard fork process. All this can affect short-term prices. Since Ethereum is the second largest cryptocurrency, its price movements are certainly capable of influencing the cryptocurrency market."
Will the current volatility decrease in the near future?
Analysts now agree that the ongoing turbulence is largely due to macroeconomic factors - primarily high inflation in the US and Europe and the risk of an impending global recession.
In addition, the digital asset market is also gripped by certain concerns, which were provoked by the tightening of crypto regulation and the clear desire of world regulators to fully control cash flows in cryptocurrencies. But this trend may change in the near and medium term.
Also, some experts note that cryptocurrency volatility has continued to decline in recent weeks, albeit slowly, because we are already on the reverse side of the current bear market cycle.
However, bitcoin could still fall below its current levels, although its short to medium term upside potential is still extremely high.
