Bitcoin price volatility has crashed in the last 12 months as the bear market killed off the speculative frenzy.
Daily volatility, the spread between the price high and price low, stood at $61 yesterday – down a hefty 98 percent from the figure of $3,468 observed on Jan. 16, 2018 – according to CoinMarketCap data. Meanwhile, bitcoin's price is also down 74 percent year-on-year. Generally, with a sharp drop in price, volatility in dollar terms tends to fall in parallel.
Notably, volatility was extremely high in percentage terms 12 months ago. The trading range was 26 percent on Jan. 16, 2018, indicating that the crypto market frenzy was at its peak.
Volatility, however, subsided as the year progressed: dropping from $973 in the first quarter to $345, $245 and $195, in the following quarters, respectively. Meanwhile, in percentage terms, average daily volatility fell from 9.14 percent to 3.6 percent over 2018.
This year has begun on a much more calm note. Daily volatility has remained largely below $200 and hit a 2.5-month low of $45.17 on Jan. 12. Many consider the slide in volatility a sign of speculative froth leaving the market and the cryptocurrency nearing a bottom.
It is worth noting that an extended period of low volatility usually ends up paving way for a big move. Therefore, BTC could soon violate the six-day-long trading range of $3,500 to $3,700.
Moreover, a range breakdown looks likely as the long-term technical charts are biased toward the bears. As of writing, BTC is changing hands at $3,585 on Bitstamp.
As seen above, BTC fell 13 percent last week, reinforcing the bearish view put forward by the descending 10-week moving average, currently at $3,919.
The outlook remains bearish as long as BTC is held below the 10-week MA.
4-hour and daily chart
BTC has created a neutral diamond pattern on the 4-hour chart. The prospects of BTC breaking the $3,700-$3,500 range to the downside would rise significantly if the diamond is breached on the lower side.
The relative strength index (RSI) is biased bearish at 41. So, there is plenty scope for a sell-off post-breakdown.
Put simply, the prospects of BTC breaching the $3,700-$3,500 range to the downside would rise significantly if the diamond breakdown is confirmed.
- BTC is more likely to see a downside break of the $3,700-$3,500 range.
- $4,000 would be back on the table if BTC defies the bearish setup on the long term charts with a move above $3,700.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.