Bitcoin Volatility at 3-Month Low as Market Awaits Big Price Move

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Bitcoin market volatility has hit three-month lows - marking a price squeeze that could soon pave the way for a big move on either side.

The spread between bitcoin's Bollinger bands - volatility indicators placed two standard deviations above and below the 20-day moving price average - narrowed to $895 on Monday.

Bitcoin has spent a better part of the last two weeks trading the range of $6,450-$7,450, with the range further narrowing to $7,000-$7,300 since Thursday.

As can be seen, bitcoin's price volatility has exploded following previous tight ranges in October 2019 and January 2020.Other volatility indicators have also witnessed a sharp drop over the last few weeks.

The volatility situation in the bitcoin options market looks to have normalized, as one-month implied volatility is now hovering below its average level of 77 percent, according to data provided by crypto derivatives firm Skew.Option traders typically buy options when volatility drops below the lifetime average and tend to sell when volatility reaches extreme highs.

The cryptocurrency fell by nearly 40 percent on March 12 and hit a low of $3,867 on the following day, according to CoinDesk's Bitcoin Price Index.

Further, oil prices crashed close to a two-decade low below $16 early Monday on concerns of high inventory buildup in the U.S. As a result, equity markets could come under pressure, pushing bitcoin lower.

Put simply, the low-volatility period could end with a downside move, more so as miner-led selling pressure for bitcoin is currently high, according to crypto asset analytics company Coin Metrics.

Both bitcoin cash and bitcoin SV recently failed to rally on their respective halvings.

At press time, bitcoin is sidelined near $7,070 and the futures on the S&P 500 are reporting risk aversion with a 1.5 percent drop.