According to a recent analysis by crypto data provider Kaiko, the cryptocurrency market is experiencing unusually high volatility this September.
Bitcoin (BTC) and Ethereum (ETH) lead the way in this regard, with both assets seeing significant increases in their 30-day volatility levels, indicating that it will be a turbulent month for crypto investors.
Kaiko’s analysis revealed that BTC’s 30-day volatility has risen to 70%, nearly doubling levels seen last year and approaching the peak observed in March 2023 when BTC reached its all-time high. Ethereum’s volatility has surpassed both March levels and BTC’s current volatility, marking a notable departure from historical trends where September has generally exhibited lower volatility compared to Q1.
Forward-looking indicators such as implied volatility (IV), which measures market expectations of future price movements based on current options trading, have also shown an increase for BTC since early September.
Short-term option maturities witnessed the sharpest increase in implied volatility. The September 13 maturities jumped from 52% to 61%, outpacing even the end-of-September contracts. This inverse pattern, where short-term implied volatility exceeds long-term measures, usually indicates increasing market stress. In such scenarios, risk managers may consider reducing market risk to reduce potential losses, according to the analyst firm.
These market dynamics align with the latest US employment report, which has dampened hopes for a significant rate cut, while upcoming US Consumer Price Index (CPI) data could further impact market sentiment. In addition, the US presidential election in November also adds to market uncertainty, as volatility in US stocks has historically peaked one to three months before election day, particularly when the incumbent party’s grip on power is uncertain.
Despite the turmoil in the market, there are signs of increasing participation, particularly in the Bitcoin market. Bitcoin’s cumulative trading volume in the first eight months of 2024 is approaching $3 trillion, up nearly 20% from its previous peak in 2021. This surge in activity comes as smaller exchanges struggle to maintain market share amid tighter regulation and diminishing gains from the 2022/23 bear market.
The market share of major US crypto exchange Coinbase eroded over the summer, falling from 53% in June to 41% in early September. Newer exchange Bullish has benefited the most from this shift, nearly doubling its market share from 17% to 33% in the same period. Overall, major US exchanges have increased their dominance, with the top three exchanges by volume holding about 90% of the market, up from 66% in previous years.
*This is not investment advice.