Bitcoin Price Resumes Narrow Trading Pattern as Bulls Struggle for Momentum
Bitcoin was back on the defensive Monday, as prices approached a key psychological support following a series of failed rallies last week. The leading digital currency by market capitalization is caught in a low-volatility, low-volume trading pattern that could keep prices firmly contained for the foreseeable future.
The bitcoin price reached a low of $6,410 on Monday, according to CCN, before rebounding modestly later in the session. At the time of writing, BTC was down 1% at $6,473, according to CoinMarketCap. Prices reached a high of around $6,552 over the weekend.
Bitcoin continues to trade at a premium on Bitfinex, with the digital currency now offered at $6,587.
At current values, BTC is capitalized at $112.3 billion for a 53.7% share of the overall market. The combined value of all digital assets in circulation hovered near $209 billion at the start of Monday. Trade volumes across all cryptoassets reached $10.8 billion.
Low Volume, Low Volatility
Bitcoin’s price action has narrowed significantly over the course of the year, as the introduction of futures trading helped markets stabilize following an adrenaline-filled 2018. Although BTC continues to trade at roughly a third of its all-time high, it has carved out a firm price floor and has exhibited much lower volatility than in previous years.
The sharp decline in volatility can be highlighted by the bitcoin volatility index, which tracks daily fluctuations in BTC’s open price. Over the past 30 days, bitcoin’s volatility index has averaged 1.81%, according to Bitvol.info. This number represents the extent of BTC’s average fluctuation over that period.
Of course, the sharp drop in volatility isn’t all positive news, especially for day traders and speculators of virtual currency. For bitcoin, declining volatility also means a sharp drop off in daily trading volumes.
Daily turnover in BTC approached yearly lows on Sunday, hitting a low of around $3.1 billion, according to CoinMarketCap. For sustained rallies in bitcoin to occur, trade volumes of at least $4 billion are generally observed.
A lack of clarity on the direction of bitcoin and the broader market will likely keep price action limited over the short term. However, as we’ve observed repeatedly this year, prolonged periods of narrow trading ranges are often followed by sharp pullbacks in the market. This was observed earlier this month before a sudden selloff of Tether (USDT) propelled bitcoin sharply higher.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.