Bitcoin Volatility Nearing 2015 Lows

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Bitcoin is trading higher by almost $2 dollars on BTC-E. After opening at $241.53, bitcoin fell to $240.53 by mid-day. From here we rallied back up to $243.89. We are currently quoted at $243.40 on this exchange. As we can see on the chart below, BTC is now only $2 dollars away from the $245.80 double top.

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But on OKCoin we only gained about $1 dollars. Here we opened at $244.52 and we’re currently trading at $245.42. The high and low stand at $245.78 and $243.42, for a total of $2.36 dollars. This compares to $3 dollars and 36 cents on BTC-E. But even those figures are well below historical values.

On the chart below we can see the sorry state of bitcoin volatility. The first indicator window shows the Average True Range for the last 20 days. The second indicator window shows the same measure for the last 100 days. The Average True Range displays a simple arithmetic average of the last X daily ranges, measured from high to low. This is a common measure for volatility in trading instruments that don’t have a developed options markets, like bitcoin.

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The first thing that jumps out is that both ATRs are trending down. Since the start of September BTC/USD entered into a new range and volatility has been shirking day by day. Here are the daily range for the last three days on BTC-E: October 8th $3.89; October 9th $3.18; October 10th (today) $3.36.

This large volatility contraction brought down the ATR-20 almost right away but even the longer-term ATR-100 has been moving down since September 22nd. But like we always say, slow periods are these are the perfect jumping point for breakouts and possible market trends. For bitcoin, the two rough breakout areas are $250 on the upside and $224 on the downside. A decisive break beyond either extreme may open the door to more gains/losses.

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