While its likely that Bitcoin will move sideways in the short term, a drop in ‘historical volatility’ usually means investors are put in a good position to go long on the leading cryptocurrency.
Bitcoin is approaching the ‘buy zone’ based on volatility metrics. Crypto-analyst Philip Swift (@PositiveCrypto) has charted that historical volatility has nearly returned to bottom levels. He argues that this is the perfect position to go long.
In a chart posted on Twitter, Swift demonstrates that whenever Bitcoin’s historical volatility drops below a particular threshold, it usually precedes a significant price uptick. This may soon be playing out spectacularly for long-term investors.
It's very possible that $BTC just goes sideways for a while now.
If that scenario plays out, then it is worth keeping an eye on Historical Volatility – currently dropping quickly.
It would present a lovely long position trade opportunity when it drops down to the green box. 😋 pic.twitter.com/Z1g7XLtAIE
— Philip Swift (@PositiveCrypto) September 9, 2019
A similar scenario played out earlier this year in March. It was then that Bitcoin was oscillating a few hundred dollars under the $4,000 price point — only to run up past $13,000 briefly by the end of June. This may be playing out again given that August saw some of the lowest volatility that Bitcoin has seen in months.
Moreover, there are many positive indicators that Bitcoin will finish Q4 going strong. With its halving set to occur in May of 2020, the upward price pressure will be felt more strongly going forward. With Bakkt also going live in Q4, institutional money will likely continue to form an even greater foundation for Bitcoin’s current price movements.
Historical volatility is thus a useful metric on which to judge whether or not the current price point is a smart entry-level. By all estimates, this seems to be the calm before the storm. Swift is suggesting that traders should wait out a few more weeks for historical volatility to drop before jumping in on any longs.
Do you agree that historical volatility is a useful metric for choosing when to buy Bitcoin? Does a drop in this metric generally precede a price rise, in your view? Let us know your thoughts below in the comments.
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Images courtesy of Twitter.