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Which Way? Bitcoin's Low Volatility May Force Big Move
Bitcoin could be in for a big move as the daily trading range tightens, but will the bulls or the bears gain the upper hand?
Updated Sep 14, 2021, 1:53 p.m. Published Jun 8, 2018, 10:41 a.m.
Bitcoin has been squeezed into an increasingly narrow range for more than two weeks and is now experiencing volatility not seen for eight months.
As a result, it's looking likely that bitcoin could soon make a strong move, but the direction it will take when that happens is less than clear. Since May 24, the cryptocurrency has been restricted to a range of $7,000–$7,800 range, which is already very tight, but the price has barely moved in the last 36 hours, likely indicating an indecisive market.
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Daily volatility, as indicated by the spread between the daily price high and daily price low, fell to $107.63 on Thursday – the lowest level since Oct. 2, 2017 and down 86 percent from the 2018 average of $793, according to CoinDesk's Bitcoin Price Index (BPI).
As of writing, prices on CoinDesk's Bitcoin Price Index (BPI) are at $7,580, marking around a $100 drop over 24 hours.
While all is calm now it may not continue that way for long, as an extended period of sideways action is often followed by a violent move on either side. As technical theory states, the wider the range and the longer the period of the consolidation, the more violent a breakout tends to be.
So, bitcoin could see a speedy $800 move very soon – in either direction.
Daily chart
Bitcoin had looked set up for a major bullish move earlier this week, following an upside break of the falling channel. Now the bull's failure to cross resistance at $7,780 has left the doors open for the bears to make a comeback.
As a result, the probability of bitcoin ending the period of consolidation with a downside break is the more likely of the two possibilities. Indeed, prices are starting to drop at press time.
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- A move above $7,819 (50-week moving average) would signal a bullish breakout and would set the tone for a rally to pennant resistance located at $8,880.
- On the downside, a break below $7,090 (pennant support) would imply a bearish breakdown. In this case, BTC could potentially drop below $6,000 (Feb low).
Arrows image via Shutterstock
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- Governor Kazuo Ueda indicated a high probability of a rate hike, with officials prepared for further tightening if their economic outlook supports it.
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