Volatility traders looking to capitalize on significant price swings may soon find opportunities. A key indicator suggests that bitcoin (BTC), currently above $100,000, resembles a coiled spring poised to release energy in either direction.
The primary metric to consider is the rolling 60-day price range, which represents the variation in maximum and minimum price ticks in percentage terms. A tighter range often implies stable market conditions characterized by range play and demand-supply equilibrium.
Analysis by Glassnode highlights that bitcoin’s 60-day range is now tighter than its current trading range. Historically, such patterns have foreshadowed substantial volatility explosions.
According to Glassnode’s weekly analysis report, “All of these instances have occurred prior to a significant burst of volatility, with the majority being in early bull markets or prior to late-stage capitulations in bear cycles.”
Volatility is inherently mean-reverting, which means that it tends to oscillate around its lifetime average. Rapid price swings usually follow periods of low volatility and vice versa.
It is also essential to note that volatility is price agnostic. Increased volatility indicates that price fluctuations will become larger and possibly more unpredictable. However, it does not provide an indication of whether prices will surge or slump.
Recent flows have shown a bullish bias, particularly on the Chicago Mercantile Exchange (CME), where traders have been heavily investing in call options. A similar bullish sentiment is apparent on Deribit and other exchanges.
“BTC futures continue to trend upward, especially on the front end, as the market’s net-long exposure from last week remains solid. Bullish bets currently outpace bearish ones by a ratio of approximately 20:1,” stated QCP Capital in a recent Telegram broadcast.
If current positioning is a reliable indicator, it is reasonable to conclude that market participants are anticipating a bullish resolution to BTC’s ongoing consolidation between $90,000 and $110,000.
