Silence before the storm? Bitcoin is getting ready for a big move
It's getting more and more boring in Bitcoin's chart, but a big move seems to be in the making. The question is which direction the course chooses.
A major price movement is lurking for Bitcoin (BTC). The volatility is clearly decreasing and from the chart it does not seem to be long before fireworks appear again. The only question is which direction the course will take.
On Bitcoin's daily chart, the Bollinger Bands are as close together as has rarely happened in two and a half years.
Bollinger Bands are two lines above and below the average price of the last 20 days. The more violently the course fluctuates, the further apart they are. If they crawl towards each other, traders speak of a squeeze.
The squeeze went lightning fast. According to Axel Adler Jr., analyst at CryptoQuant, the distance between the bonds shrank from 11.6 to 4.9 percent of the average price between 6 and 13 October.
So in a week's time, it was more than halved. Nevertheless, Adler warns that the narrow bands do not reveal anything about the direction or the moment of the outbreak.
The options market shows the same picture. The DVOL index of options exchange Deribit is around 36 points. At the beginning of October, it was lower than 95 percent of all days since March 2021, according to CryptoQuant.
The DVOL is the Bitcoin version of the VIX, Wall Street's well-known fear meter. The index reads from option prices how much movement traders expect in the next 30 days. The lower the position, the quieter the market thinks it will remain.
A reading of 36 equates to an expected fluctuation of about 10 percent in a month, which is a calm outlook for the crypto currency.
The decreasing volatility translates into lower and lower peaks for Bitcoin. At the same time, the bulls continue to successfully defend the support level around $81,000.
Numerous wicks can be found here in the chart, which shows that price drops below this level are bought up at lightning speed. This happened again yesterday.
A descending triangle breaks down more often, but an outbreak at the top is also easy to defend. For example, the trend has been clearly upward for two months and Bitcoin is holding above the 50-day average.
In addition, there is a hidden bullish divergence. The price is at a higher low, while the RSI (a momentum indicator) is at a lower low. Traders read that as a sign that the upward trend is not yet exhausted.
Only when Bitcoin breaks below $80,000 should we expect a larger correction. And right now, $84,000 is the most important level at the top.