Trading Bitcoin (BTC) on the side can be boring for those trying to profit from price swings, but it’s far from new that the original cryptocurrency does (relatively) nothing.
If there’s one thing all traders need to make money, it’s volatility. And bitcoin traders are no different from traditional traders here. In fact, it could be argued that they rely even more on high volatility due to the more volatile nature of digital assets compared to traditional assets like stocks and fiat currencies.
As a result, bitcoin’s volatility – or lack thereof – has once again become a concern for some with the number one cryptocurrency now in its third week in a consolidation zone that measures less than 10% from bottom to top.
The latest round of sideways price action began on May 10, when the BTC chart had just printed its 7th weekly red candle – then, the most weekly red candles in bitcoin history.
As usual in the markets, periods of volatility end with phases of consolidation, which in turn usually end with a new round of volatility. As such, it is perhaps unsurprising that bitcoin has remained in a relatively narrow range for some time.
Similarly, BTC was also famous for its stability in October and November 2018, towards the end of the infamous bitcoin bear market of 2018. Those who were around then might even remember how traders from crypto jokingly referred to BTC as the new “stablecoin”.
As the meme above suggests, however, the remarkable stability came to an abrupt end on November 14, when the final bear market flush took BTC from around $6,400 to just $3,200 in 30 days.
Bitcoin consolidation between September and November 2018:
Bitcoin’s most recent consolidation phases
Keeping in mind how brutally the consolidation of September, October and November 2018 ended for BTC, let’s now take a look at the 5 most recent bitcoin consolidations to see what lessons they can teach us.
During the current consolidation phase, all of Bitcoin’s daily candles have closed in the range between $28,700 and $31,300, with this phase lasting over two weeks so far. This consolidation is not yet complete so we don’t know if the breakout will be higher or lower.
A similar phase of consolidation was seen as recently as January this year, when BTC hovered between $40,600 and $44,000 for 14 days. As with the current consolidation, the price this time also remained within a range of around 10% from bottom to top.
Another even longer narrow consolidation phase was seen in December 2020, when BTC spent 15 days in the range between USD 18,000 and USD 19,700. The phase ended with a breakout to the upside, eventually taking BTC to a high of over $60,000 in April the following year.
An even bigger consolidation phase occurred in June and July 2020, when BTC hovered in the range between USD 9,000 and USD 9,700 for 42 days. Once again, the consolidation phase ended with a breakout to the upside, marking the continuation of bitcoin’s great rally at the end of 2020.
Finally, going back to September 2019, BTC has remained in the range between USD 9,900 and USD 10,600 for 19 days. This time, the consolidation ended with a downward break, which caused BTC to drop around 15% in just 2 days.
More volatility to come
To sum up, it’s nothing new for bitcoin to trade in a relatively tight range for weeks at a time, and often for two weeks or more.
These are just five of the most recent consolidation phases, and while we could have gone much further, the lesson remains the same: Consolidation phases always end at some point, and that end tends to to appear as a sharp peak. volatility – either down or up.
For the sake of all HODLers, we can only hope that this time it will be a breakthrough on the upside.
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