Bitcoin prices are not exactly known for being stable, with markets capable of fluctuating wildly from one day to the next.
But this historical perception may be increasingly out of date, with technical indicators showing volatility to have reached a two year low – possibly ending a tough three months for BTC investors.
The world’s largest cryptocurrency has recorded lower highs since the start of July, and the lack of any firm momentum in either direction has sidelined both bull and bear investors. This has resulted in narrower Bollinger bands, which have hit their tightest level since December 2016.
Historically, lengthy periods of low volatility have been a precursor to a prolonged rally in either direction, and investors will now be monitoring developments in the bitcoin market for signs of a possible breakout in either direction.
According to analysis conducted by CoinDesk, this could see July highs of $8,500 brought back into play, should bitcoin go on to gain buy-side momentum. At the time of writing, BTC was trading for $6,507.
However, should the markets take a turn for the worse, this could bring the lows of June back to the table, where bitcoin fell to $5,755.
Volatility has been attractive for some investors, particularly those who backed the historic bull-run to December 2017. However, it is generally considered challenging for bitcoin’s role in payments, with a more stable value the preferred state by merchants and larger investors.
In particular, institutional investors have remained reluctant to get too involved with bitcoin, on the grounds that the currency is too volatile to justify the risk of exposure.
Now, with volatility seemingly evening out, bitcoin is likely to be seen as more appealing to those large institutional investors, with the potential to cause massive surges in the markets in either direction.
While volatility levels are calmed for the time being, some analysts expect a return to more volatile conditions over the next few days, as investors look for signs of emerging momentum on either the buy or sell side.
It remains to be seen whether the low volatility is a sign of things to come, or merely a temporary lull on the way to much more significant price movements.