The last time volatility was so low, Bitcoin fell 50%

It may seem like a cliché at this point, but Bitcoin's volatility is extremely low. This is a by-product of BTC's price promotions in recent weeks, which most traders have found “boring”.

However, as volatility continues to decrease, analysts conclude that there is a big move ahead. Nothing shows this as well as the Bollinger Bands, a technical indicator that shows important price levels and the volatility of a market.

Bitcoin volatility continues to decrease

If you take a step back and look at Bitcoin's price action from a macro perspective, you could argue that BTC has stalled. For the past nine or ten weeks, the leading cryptocurrency has been stuck in a 15% consolidation pattern. Both bulls and bears have failed to trigger an outbreak in one direction or the other.

As a result, the width of the Bollinger Bands that spread apart in times of high volatility has reached an extremely low level. Brave New Coin analyst Josh Olszewicz shared the chart below, noting that the “Bollinger Bands have not been as tight since November 2018”. Periods with low volatility after the Bollinger bands are indicated by the vertical lines.

Olszewicz's observation is important because, for those who don't remember, Bitcoin crashed 50% in the two weeks after consolidation from September to November.

In a sense, the price action prior to the November 2018 crash is like the price action now: Bitcoin consolidated at a single price point for 2-3 months in both periods.

The question is: will history repeat itself or will bitcoin move up?

According to Mike McGlone, senior commodity analyst at Bloomberg, the upward consolidation will resolve:

"VOLATILITY IS LIKELY TO CONTINUE TO DECREASE AS BITCOIN EXTENDS ITS TRANSITION FROM A HIGHLY SPECULATIVE ASSET TO THE CRYPTO EQUIVALENT OF GOLD, BUT WE EXPECT THE RECENT COMPRESSION TO BE RESOLVED BY HIGHER PRICES."

This can be corroborated by Bitcoin's mining data. The seven-day moving average of the hash rate has just reached a new all-time high of 125 exahashes per second.

An analysis by Charles Edwards, a digital asset manager, showed that a strong mining ecosystem should go hand in hand with higher prices. Edwards' "Energy Value" model states that "the value of Bitcoin is a function of its energy use in joules". Bitcoin is trading 28% below its EV as the hash rate has risen sharply.