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Bitcoin Price Volatility Hits 3-Month Low

Bitcoin’s price undulations became the calmest in three months on Tuesday, as volatility revisited levels last seen ahead of the “Black Thursday” crash on March 12.

The leading cryptocurrency’s 30-day volatility has now fallen to 40%, the lowest level since March 6, according to blockchain analytics firm IntoTheBlock. Meanwhile, 60-day volatility declined to 52.18%, its lowest since March 11. 

The decline in volatility may be associated with the lack of clear directional bias in the market.

Bitcoin rallied by over 150% in the two months leading up to the May 11 mining reward halving. Since then, however, the buyers have repeatedly failed to establish a foothold above $10,000. At the same time, downside has been restricted to around $8,600. 

The range has tightened in the last few days, with the cryptocurrency trading between $9,300 and $9,900.

A prolonged period of low-volatility price consolidation often paves the way for a big move on either side. The longer the consolidation, the more violent is the breakout/breakdown. 

However, while the cryptocurrency is stuck in a narrowing price range, the volatility metrics haven’t yet reached abnormally low levels. 

Thirty-day volatility is still hovering well above 32.84% – the low reached on Feb. 15. Bitcoin topped out near $10,500 in mid-February and fell by over 63% in the following two weeks. 

Historical data shows that bitcoin tends to chart sudden big moves following a fall in volatility to or lower than 35%.

For instance, volatility hit a low of 35% on Sept. 21, 2019, and in the following three days, the cryptocurrency fell by nearly $2,300. The sharp rise from $6,800 to $9,500 seen in January was preceded by a drop in volatility to a multi-month low of 33%. 

So bitcoin may consolidate for a few more days before charting a big move in either direction. The slide in bitcoin balances held on exchanges suggests prices may move the higher side. However, some technical indicators suggest otherwise.

The MACD histogram, which is used to identify trend changes and trend strength, has produced lower highs, contradicting higher highs on price. That bearish divergence is indicative of weakening upward momentum and often precedes notable price pullbacks. 

The cryptocurrency’s repeated failure to keep gains above $10,000 is also echoing similar sentiments. 

The technical outlook would turn bullish if prices rise above $10,500. At press time, bitcoin is trading near $9,680, representing a 1.1% decline on the day.

Disclosure: The author holds no cryptocurrency at the time of writing.


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