Analyst predicts BTC may not see volatility for a while

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Written by

Kevin Lopez
Published on

January 5, 2023

Key points: 

  • Currently, the price of BTC is experiencing the least volatile conditions in its history, data from metrics like the MACD and the RSI confirms that.
  • "Generally, when Bitcoin breaks out of extremely low volatility, the ensuing trend tends to last. Don’t fight the trend on the next major move" - Charles Edwards, the founder, and CEO of asset manager Capriole Investments.
  • Currently, the two bands of the Bollinger bands indicator are squeezed around the central average on BTC/USD and it is assumed that volatility will now increase. 
  • However, the duration of the squeeze is not necessarily important to the timing or strength of future volatility.
  • Numerous warnings have cautioned holders about what may be coming, these include a drop to $10,000 or lower in the first quarter.

Bitcoin traders are eager for increased volatility in the BTC price, but there are differing opinions on when this will occur.

Currently, the price of BTC is experiencing the least volatile conditions in its history, data from metrics like the Moving Average Convergence Divergence (MACD) and the Relative Strength Index (RSI) confirms that.

Volatility is not clear

Since the FTX debacle, Bitcoin has remained in a narrow trading range that is unwilling to expand.

Despite macro factors, low-volume holiday trading, and a yearly candle close, BTC's price action has remained confined to a region centered around $17,000.

This is the least volatile period in the history of the Bitcoin historical volatility index (BVOL), other data also indicates that this type of behavior is uncommon.

Two months after FTX, traders and analysts are discussing the breakout time and direction for BTC/USD — and which way it will move.

A significant transition is in the works for Bitcoin, Charles Edwards, the founder, and CEO of asset manager Capriole Investments said on January 5.

“Bitcoin is currently trading at a major low in volatility. Generally, when Bitcoin breaks out of extremely low volatility, the ensuing trend tends to last. Don’t fight the trend on the next major move.”

A second chart showed the 30-day annualized standard deviation of Bitcoin's volatility, this is now at its lowest point in years.

BTC/USD annotated chart. Source - Charles Edwards [Twitter]BTC/USD annotated chart. Source - Charles Edwards [Twitter]

Similarly convinced that the status quo will be overturned is the “Wolf of All Streets” podcast host Scott Melker, who this week noted the “tightest” Bollinger Bands he'd ever seen on the daily Bitcoin chart.

Bollinger bands are a popular volatility indicator that has been around since the 1980s. They also employ standard deviation to determine the maximum and minimum price movements within a given timeframe. Multiple applications are possible, including the ability to assess the volatility or non-volatility of price action, as well as the associated entry and exit points.

Currently, the two bands are squeezed around the central average on BTC/USD, this data is from TradingView, and it is assumed that volatility will now increase.

For Bollinger, however, the duration of the squeeze is not necessarily important to the timing or strength of future volatility.

I've observed that Squeezes that are prolonged are typically not significant. “I prefer Squeeze and Go!” he responded to Melker.

BTC/USD 1D chart with Bollinger bands. Source - TradingViewBTC/USD 1D chart with Bollinger bands. Source - TradingView

Not enough positives in the market 

Additionally, there are numerous bearish BTC price forecasts in effect at the start of 2023.

Numerous warnings have cautioned holders about what may be coming, these include a drop to $10,000 or lower in the first quarter.

Optimism is lower than expected, and analysts are interested in seeing how the United States macroeconomic policies affect risk assets.

 


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