An unusually placid Bitcoin may be girding for a pick-up in turbulence and a lurch lower, if history is any guide.
The world's largest cryptocurrency is notorious for its volatility but has defied that stereotype by oscillating in a relatively constrained range around the $20,000 level in the four months since hitting a low in mid-June.
But now a potentially portentous indicator known as the Bollinger bandwidth has shrunk to the narrowest since 2020. The bandwidth is the gap between the upper and lower bands in a Bollinger study, a popular way of gauging volatility.
The bandwidth has been similarly narrow five other times in the past two years, according to data compiled by Bloomberg. On four of those occasions, Bitcoin subsequently shed almost 16 per cent over 20 days. One time, back in October 2020, it embarked on a surge to a record high of almost $69,000.
Some technical analysts therefore view the tight Bollinger bandwidth as a harbinger of increased Bitcoin swings and potentially a drop in its price.
A global wave of monetary tightening to fight inflation has spurred a near 60 per cent slide in Bitcoin this year. Some $2 trillion has been wiped off cryptocurrencies since a high in November 2021, prompting regulators to step up oversight.
"I still don't think we will have a bullish run anytime soon," said Cici Lu, chief executive officer of Venn Link Partners Pte. "All it takes is one piece of negative news to do with regulation and we could break through the bottom end of" Bitcoin's recent $19,000 to $24,000 trading range, she said.
Global markets are also awaiting US inflation data due Thursday. A hot number could strengthen expectations of more Federal Reserve interest-rate hikes, roiling a range of assets, while a material slowdown may work the other way.
"We expect Bitcoin's price to be very macro driven in the near term," said Darius Sit, co-founder of crypto investment fund QCP Capital Pte. "A break out of the recent range on either side would likely be triggered by something like a surprise in the CPI print."
Bitcoin was little changed at about $19,450 as of 6:12 a.m. on Monday in London. Other coins like Ether, Solana and Cardano also struggled for direction.