- Bitcoin trades in a narrow range of $37k to $42k, which suggests that higher volatility is possible.
- BTC prices are up 3.8% in 24 hours and currently hover around $42,625 per coin.
Bitcoin is likely to see increased volatility in the near term, analytics platform Glassnode said in its March 21 issue of “The Week On-chain” newsletterInvestors
According to the platform, the futures and options markets suggest higher inbound volatility, with the outlook putting it around the ‘horizon’. Even though the on-chain activity suggests a bear stranglehold, it still pins upside sentiment in the crypto space.
BTC price recovery
Glassnode points to Bitcoin’s recent recovery as having come amid low volatility and widespread consolidation. BTC traded at $37,000 last Week before recovering to $42,300, which is the key resistance area.
Monday’s sell-off pressure caused by fresh selling pressure saw the cryptocurrency’s flagship cryptocurrency reverse its weekend highs. This was in response to inflation comments made by Jerome Powell, Federal Reserve Chair.
Bitcoin reached new highs of $43,080 in Tuesday deals. However, it’s retreated to currently trade around $42,625 to see it remain within the key narrow range.
Chart showing the recent range lows and highs for Bitcoin. Source: Glassnode.
Deviatives point out volatility on the horizon
According to Glassnode, Bitcoin’s continued movement within the narrow range has come amid a period of low volatility. This scenario suggests that there are higher chances of new volatility building up, according to the firm.
Futures and options markets suggest higher implied volatility after pricing in short-term implied volatility around Fed rate hikes.
“Options implied volatility is coming off relatively low levels between 60% and 80%, which have historically been followed by periods of extremely high volatility. Such high volatility events in 2021 include the May sell-off, the short-squeeze in July, and the October rally to ATHs,” the firm noted.
It is important to note that traders often use implied volatility to predict how risky a trade will be, based on the possibility of the market moving in one direction.