Bitcoin has seen tremendous volatility in the last week as the FED announced their plans on how to tackle ongoing inflations. In anticipation of this news, Bitcoin reacted strongly as investors and traders alike speculated heavily on the outcome of the meeting.
One could say these fundamentals were the reason for the heavy volatility, which may be true… in part. But it is the underlying technical problems that set the stage for such volatility to occur.
Overall, Bitcoin has been quietly trading in a large sideways range between $45,000 and $34,000. In the most recent progression of this sideways range, BTC price’s action has been contracting.
As Bitcoin is making lower highs and higher lows, a triangle like pattern is emerging, effectively validating the fact that Bitcoin is trading at a slower pace, where the contracting price action is also accompanied by a significant decrease in overall volume.
It is the absence of significant volume that paves the way for heavy volatility within this, as lesser volume is needed to make significant moves in price and create imbalances in the books. As such was the case during the FED announcement.
On a more local level Bitcoin has traded in a sideways range between the $39,000 and $38,000 mark as shown in the red box in the figure below. On the day of the FED announcement we can see volatility increased rapidly, but despite doing so, the technical reactions gave accurate information as to where price found support as it back tested the range it left initially before climbing higher onto its peak at $41,500.
Since then Bitcoin has been trading quietly once again, trading within a new local range, resulting in the overall technical environment to dominate again as Bitcoin contracts further into a potential apex of its larger range.
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