Bitcoin’s price action has quickly become unbearable for many traders.
As NewsBTC has reported extensively over recent days, the crypto market has come to an absolute standstill.
In the past week, the cryptocurrency has traded in a right 5.5% range, with bulls and bears not even attempting to break out of the consolidation. Stepping back, the lack of volatility is further accentuated; For nearly nine weeks now, Bitcoin has traded in the range between $8,500 and $10,000.
Recent volatility analyses, however, have suggested an imminent breakout for BTC.
A Massive Bitcoin Move Is Coming
As reported by NewsBTC, the recent consolidation has resulted in Bitcoin’s historical volatility index reaching lows not seen since March/April of 2019.
For those that don’t remember, here’s a reminder of what happened then: after consolidating around $3,000-4,000 for four months, Bitcoin rocketed $1,000 in a single day. This move — likened to “fireworks” by investors — kickstarted a BTC bull run that sent the asset to $14,000.
That’s to say, Bitcoin moved 25% in a single day last time the crypto market was this non-volatile.
Bitcoin Historical Volatility Index, one-day chart, BitMEX chart from "XC" (@Runtheirstops on Twitter). Chart from TradingView.com
The implied volatility of the Bitcoin market has also plunged. The measure has reached its lowest value since the day before the 25% surge, economist Alex Krüger recently pointed out.
As Investopedia describes, the implied volatility of an asset is “the market’s forecast of a likely movement in a security’s price.” IV is most often derived through options trading.
The important takeaway with this data is, periods of extremely low volatility often precede Bitcoin breakouts of macro importance.
How Can One Trade It
With Bitcoin coiling for a breakout, traders may be wondering how they can benefit from the impending volatility. While there is a multitude of ways traders can do so, but here are two easily accessible to most cryptocurrency holders:
- Bet on a spike in volatility: Arguably one of the safest ways to capitalize on the breakout is through volatility derivatives that appreciate when the market moves and fall when the market stagnates. Volatility derivatives are a new concept in the cryptocurrency space, with FTX being the only reputable exchange supporting such contracts. Traders can also synthetically create a position on volatility through other contracts.
- Open a Bitcoin long or short, depending on which way you think BTC will move: If investors have a bias about which way this breakout will take Bitcoin, they can speculate through a leveraged long or a leveraged short. A long is a bet that an asset will appreciate in value, and a short is the opposite of that.
Disclaimer: Readers of this article should use/trade financial products, assets, or platforms mentioned in this article at their own risk. This author and NewsBTC are not liable for any losses incurred while using the financial products or assets mentioned in this article.
Featured Image from Shutterstock Price tags: xbtusd, btcusd, btcusdt Here Are 3 Ways to Benefit From Impending Bitcoin Volatility