Bitcoin’s Whirlwind Rise and Fall: Trading Volatility
Rowan Crosby • 1 min read
What a day that was for Bitcoin. The world’s leading cryptocurrency shot up and nearly tagged $14,000, yet by days end price had fallen back under $11,000.
In the world of BTC, nothing really comes as a shock anymore. After the meteoric rise and fall, yesterday’s move was quite subdued. However, even by its own standards, volatility is high at the moment.
As I mentioned yesterday, shorting Bitcoin is a dangerous game, but when we made a lower high beneath $14,000 that at least gave us a level to risk off.
At the same time, the pullback to $12,000 never really provided a buying opportunity as the bids got smashed and price dumped straight through pretty quickly. Perhaps we now need to move the focus back on to $11,000 as a possible entry point for a long entry?
We also have to remember how volatility works. Given that we have had a vertical move, price might very well need time to reset and find balance. Generally speaking, price moves between periods of high volatility and volatility compression. Compression leads to big breaks.
Earlier this year, volatility was at record lows and price was tightly held. After a number of developments, culminating in the announcement of Facebook’s Libra, we saw a huge explosion.
Given how tricky this trade is, I am looking to wait for another volatility contraction and subsequent breakout.
So far $11,000 looks to be strong support, so I will be waiting to see how price trades and if it can coil and shape as something like a flag or triangle, which are classic volatility contraction based chart patterns.