Bitcoin volatility levels have now bitten a new low since November 2020. Volatility in the market has seen a downward drop as the price of bitcoin has stagnated in the last few months. As bitcoin saw record highs at the start of the bull market, volatility had risen greatly. Speculations rocked the market and there was a high chance of bitcoin swaying in the downward direction while it surged.
This led to high volatility levels. And as the market hit its height in April, volatility seemed to have leveled out. Then continuously increased while prices fell in May. Worthy of note that vocality is highest when prices are on their way up.
This is seen in the chart below when volatility skyrocketed during the rally in February.
Bitcoin volatility down | Source: Bitcoin Volatility Index on TheBlockCrypto
Bitcoin Losing Steam
Volatility increases as more people buy and sell in the market. When buy and sell orders are full, there is a high probability for prices to move quite drastically. There are people who are taking out gains. And then there are people who are buying into the market. This makes the price of Bitcoin extremely volatile.
But prices have currently started to even out. Some people even calling this the bottom of the market. Bitcoin price has lost a lot of momentum and has pretty much stayed in the same price range. Not much movement means very little volatility.
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Bitcoin recently recorded a drop in the number of active bitcoin addresses. With more and more people dumping their coins. This has obviously contributed to the volatility level being stagnant.
Not much movement has been recorded in the market. Coins seem to be trying hard to maintain current prices. And bitcoin is not left out of this trend.
Huge Breakout On The Horizon?
A chart with such movements usually leads to huge breakouts under the right circumstances. Long and extended periods of low volatility end with periods of extreme volatility. The likes the market saw earlier this year in February.
Bitcoin trading in the $34,000 range | Source: BTCUSD on TradingView.com
The direction of the breakout cannot be predicted in these situations. A southward-facing breakout would seem likely. But a north-wise breakout seems just as likely. Putting the market at a 50-50 chance for going either way.
Volatility can usually be a predictor of price movements when the conditions permit. A period of low volatility means any significant amount of money coming or leaving the market pushes the price of the coin either way.
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Price speculations have slowed significantly during this period.
Now, it looks that bulls are waiting on the sidelines for the perfect time to buy back in.
Featured image from The Guardian, charts from The Block Crypto and TradingView.com