Bitcoin Stuck in a Historically Tight Range, the Calm Before the Storm?

The data shows that bitcoin has been stuck in a historically tight range lately, something that could be a harbinger of extreme volatility.

Bitcoin 30-day price range narrows to tighter values

In a new tweet, the analytics firm glassnode have seen how volatile the asset has been recently. One way to determine bitcoin volatility is to take the highest and lowest price points over a specific time period and calculate their percentage difference.

The time period of interest in the context of the present discussion is a 30-day period, which means that volatility here is calculated by examining the difference between the top and bottom registered during the last 30 days.

Naturally, whenever this metric has a high value, it means that the cryptocurrency price has seen large fluctuations in the past month. On the other hand, a low price means that the asset is trading within a narrow range.

Now, here is a chart that shows the trend of the 30-day high and low, as well as the difference between the two (i.e., the 30-day range) for bitcoin throughout the coin’s history:

The value of the metric seems to have been quite low in recent days | Source: Glassnode on Twitter

As shown in the graph above, Bitcoin’s 30-day range has recently been valued at 10.7%, which means that the cryptocurrency’s price has varied between its top and bottom by 10.7% over the past month. There have been ups and downs.

From the graph, it is clearly visible that the current value of the indicator is very low compared to the benchmark during the asset’s history. Interestingly, this is despite the fact that the BTC price has recently recorded some new volatility due to FUD regulatory pressure from Binance and Coinbase.

While the asset may see some short-term volatile price action as this uncertainty emerges in the market, bitcoin is still only trading in a narrow range when looking at the grand scheme of things.

In the chart, the analytics firm has also highlighted trading days that were even tighter over the 30-day range than what is currently being seen. As expected, there do not appear to be many instances where such a trend has occurred.

Curiously, most of these events were followed by an explosion of volatility in the price of bitcoin as the narrow 30-day range moved lower. A prime example of this would be the crash of November 2018, which was preceded by a period of continuous sideways movement of the asset within a tight range. This crash happened during the bear market of the previous cycle and formed a cyclical bottom for it.

If the pattern that follows all of these examples is anything to go by, bitcoin could currently trade in a narrow range, which would result in some extreme volatility for the asset in the near term.

btc price

At the time of writing, bitcoin is trading around $25,900, down 3% over the past week.

Looks like BTC has been moving sideways since the plunge | Source: BTCUSD on TradingView

Featured images from iStock.com, Charts from TradingView.com, Glassnode.com