Volatility traders looking to capitalize on major price swings will soon find opportunities. A key indicator suggests that bitcoin (BTC), currently above $100,000, resembles a coiled spring ready to release energy in any direction.
The indicator is the 60-day moving price range, which represents the variation of the high and low prices in percentage terms. A narrower range implies stable market conditions characterized by a set of ranges and a balance between supply and demand.
Glassnode analysis shows that bitcoin’s 60-day range is now tighter than the current trading range. Historically, these patterns have heralded bursts of volatility.
“All of these cases have occurred before a significant burst of volatility, and most occurred in early bull markets or before capitulations in the later stages of bear cycles,” Glassnode said in its weekly analysis report.
Volatility is mean reverting, that is, it tends to oscillate around its life average. Rapid price swings typically follow a period of low volatility and vice versa.
It is also independent of price. Higher volatility means that price fluctuations will be larger and potentially more unpredictable. It doesn’t say whether prices will go up or down.
However, recent flows have had a bullish bias, particularly on the Chicago Mercantile Exchange, where traders have been accumulating call options. A similar bullish bias is evident on Deribit and other exchanges.
“BTC futures continue to trend higher, especially in the early part, as the market’s net long exposure from last week remains strong. Bullish bets currently outweigh bearish bets by a ratio of approximately 20:1” QCP Capital said in a Telegram broadcast. .
If positioning is any guide, it’s safe to say that market participants are expecting a bullish resolution to BTC’s multi-week consolidation between $90,000 and $110,000.
