Bitcoin’s Trading Range Narrows as Volatility Declines; What’s Next for BTC?

Bitcoin’s price swung lower on Saturday, re-testing the all-important $10,000 level for the third time this week. The largest cryptocurrency by market capitalization has carved out a narrow trader range over the past month, signaling the start of a consolidation phase.

BTC/USD Update

The bitcoin price was back above $10,000 at the time of writing, having recovered from an intraday low of $9,885.48 on Bitstamp. The coin is down 3.6% during the session.

Bitcoin (BTC/USD) trades as low as $9,885.48 on Saturday. | Source: TradingView.

Price action has weakened considerably since Tuesday, with the BTC price swinging back below the 30-day exponential moving average (EMA). The 30-day EMA served as a strong support during the bull rally between February and June.

The daily relative strength index (RSI) is back in the low 40s, a level that previously attracted new buyers. Using this indicator, we see that bitcoin hasn’t been ‘oversold’ at any point since February.

At current values, bitcoin has a total market cap of $179.1 billion, which represents 68.4% of the overall crypto ecosystem.

Trading in BTC has remained relatively steady in recent days. On Saturday, daily turnover on verified spot exchanges was $914.8 million, according to Bitwise.

Volatility in Decline

Bitcoin’s 30-day volatility index, which monitors the magnitude of price fluctuations over time, has been in firm retreat since the end of June. Volatility fell to 3.26% last weekend, the lowest in three-and-a-half months. It has risen slightly over the past week, but remains well below last month’s levels.

On Saturday, bitcoin’s 30-day volatility reading was 3.49%, according to bitvol.info. The 60-day estimate for bitcoin volatility as 5.39%. Over the past 252 days, it’s 3.99%.

Bitcoin volatility: A Double-edged sword. | Source: bitvol.info

Contrary to popular opinion, bitcoin’s volatility has declined over time due to new price discovery and higher adoption rates. For crypto traders, volatility cuts both ways as it magnifies both risks and opportunities for profit.

Bitcoin’s performance this year has been fueled by a combination of technical and fundamental factors. On the fundamental side, much of the focus has been on increased adoption of the digital asset. The introduction of Facebook’s Libra cryptocurrency was seen by many as a net positive for the emerging asset class because it opens the door to wider mainstream adoption.

The forthcoming launch of Bakkt is being described as one of the most important events in crypto history. Unlike existing bitcoin futures contracts, Bakkt will settle its futures contracts in physical BTC. If the service takes off, it could create higher demand for the asset.

In the meantime, market participants appear keen on letting bitcoin consolidate. This is to be expected after the price quadrupled in the span of less than five months. Such consolidation trends were predicted back in April when Hacked reported on the start of bitcoin’s new four-year cycle.

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. Chart via TradingView.

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