Bitcoin volatility at all-time lows despite 15% crash, is a recovery rally on the cards or more downside?
- Bitcoin price slid 15% between August 16 and 17, breaking its 55-day consolidation.
- This sudden downswing caused billions in liquidations, but volatility continues to tread near all-time lows.
- Investors wonder if BTC will experience more southbound moves as it hovers around the $26,000 level.
Bitcoin price has left holders dumbstruck after a 55-day consolidation streak ended with a bang with a 15% correction that wiped billions in open interest and liquidations. As BTC hovers around $26,000, onlookers are left with two thoughts – “Why did Bitcoin crash?” and “Where will it go next?” This article breaks down these two trains of thought.
Also read: Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Bad timing for BTC slump as market weekend tranquil sets in
Bitcoin price crash and the reason behind it
While there are many theories on why the Bitcoin price crashed, two stand out – coiling volatility and forced liquidations. Just before the 2023 rally formed a top at $31,500, BTC was already trading in a tight range. Coupled with macroeconomic conditions and rangebound movement, the volatility of BTC hit all-time lows.
BTC volatility index
This tight range continued for nearly 55 days when Bitcoin price traded inside a $2,000 range. Over its 13-year lifespan, BTC has embarked on many low-volatile phases, but each time BTC’s range breached, it triggered an explosive move.
Technically, this breakout move, in hindsight, was likely.
The second reason is that this move was due to SpaceX’s alleged reduction in the Bitcoin balance sheet. Although rumors, this is also one reason for the sudden crash in Bitcoin price.
QCP Capital notes in their newsletter that a “large BTC and ETH gamma related perp liquidations on options exchanges Deribit and OKX, which together accounted for an outsized 50% of all liquidation flow.”
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Author
Akash Girimath
FXStreet
Akash Girimath is a Mechanical Engineer interested in the chaos of the financial markets. Trying to make sense of this convoluted yet fascinating space, he switched his engineering job to become a crypto reporter and analyst.
