Bitcoin Struggles with Key Psychological Hurdle as Price Action Cools

Bitcoin’s price traded within a narrow range on Wednesday, as the bulls continued to face pressure near a key psychological resistance that, if breached, would open the door to an imminent re-test of the December high. The narrowing of price action is well reflected in the bitcoin volatility index, which is more or less unchanged over the past ten days.

BTC/USD Update

The bitcoin price was last seen trading at $4,100.00 on Bitfinex, where it was virtually unchanged. For most cryptocurrency exchanges, bitcoin’s price is currently valued between $3,990-$3,995.

On an aggregate basis, the average price is $4,048.42, according to CoinMarketCap. As the following chart shows, the bulls have lacked conviction since piercing above $4,000 last Saturday.

A prolonged period of lateral moves could either recharge the recovery or send prices tumbling. The latter was the norm during the most extreme bearish cycles observed last year. In recent months, prolonged periods of stability have actually worked in bitcoin’s favor, a sign that smart money is accumulating positions.

In the last 24 hours, exchange-based trade volume rose by $1 billion to $9.1 billion. Activity on BitMEX, a leading derivatives platform, surged. The exchange now accounts for 9.4% of the daily turnover, based on latest available data.

Bitcoin’s market capitalization continues to hover around $71.3 billion. That represents a share of 50.8% of the overall market. This so-called dominance rate has declined in recent months as altcins and tokens began to recover.

Bitcoin Market: All is Calm

With the exception of last Friday and Saturday, bitcoin has seen very little upside over the past two weeks. Conversely, the bears have also been kept at bay, leading to a narrowing of price action in and around the $3,800-$3,900 level.

This narrowing price action is well reflected in the bitcoin volatility index, which tracks the degree to which the commodity’s price varies over time. Over the last 30 days, bitcoin’s volatility reached 2.6%, according to bitvol.info. That’s fairly consistent with levels seen over the past ten days. As the following chart illustrates, volatility has been more or less unchanged over the past month after declining sharply in January and February.

While a lack of volatility is a sign of stability, it also makes significant rallies less likely. That’s because volatility is a double-edged sword for bitcoin: it leads to rapid declines during bear trends and huge gains during bullish cycles.

The decline in volatility comes as trade volumes are higher than ever. This reflects the surge in BTC supply that has made its way onto virtual currency exchanges in the last six-to-nine months. In the last 30 days, bitcoin’s exchange-based volumes reached $263 billion, according to CoinMarketCap.

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.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi

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