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Bitcoin Accelerates 8% to 1-Month High! Has it Bottomed Out?


Jul 18, 2022
Cryptos Again in Trouble? Bitcoin Breaks Rising Channel!
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The entire cryptocurrency space which is also considered an epitome of volatility had seen a massive plunge in the past few months from its 52-week highs. For instance, the largest cryptocurrency tanked a whopping 74.5% from its lifetime highs of around US$69,000 to US$ 17,592 in a matter of roughly 8 months. Investors went on a selling spree as fears over a potential recession took over and became the primary reason for investors to weed out their risky assets and flee to safe-haven assets such as and the

For the last one month, Bitcoin (BTC) had been consolidating in a very broad range of US$15,950 – US$22,400. This entire range was an indication that there has been a volatility contraction going on in BTC, which could also be considered the calm before the storm. This is because volatility is mean-reverting in nature and too long of a contraction generally results in an expansion and vice versa. 

Image Description: Daily chart of Bitcoin with ATR at the bottom

Image Source: Investing.com

Volatility expansion means an increase in the average movement of the underlying security which generally happens during a rapid one-sided move. The volatility level could also be gauged from the Average True Range (ATR) indicator (daily, 14) which is currently depicting a value of around US$1,267. This simply means that Bitcoin has been moving almost US$1,267 (on average) for the last 14 trading sessions. This is the lowest average movement for Bitcoin since January 2021. This is also due to the fact that the current price of Bitcoin is also around the levels of January 2021. 

After a long sleeping phase, BTC seems to be waking up and is probably getting ready to make some noise, again. Today, BTC rallied by a decent 8% to the day’s high of US$22,503, breaking above the long consolidation phase. This breakout, if sustained could potentially mark the bottom of the ongoing downtrend as volatility expansion after a decent squeeze generally leads to a rapid one-sided move. 

As the chart is confirming the move to potentially be on the upside, a sharp rally from here should not surprise traders. A follow-up move tomorrow that takes out today’s high would further confirm the impending rally. Talking about the support, the current level seems to be around US$18,750 – US$19,000, which is US$3,000 – US$3,500 lower than the CMP. In terms of volatility, it’s roughly 3x ATR (on the downside).

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