This Bitcoin Volatility Index Pattern Suggests A Short Pressure May Be Near


The current values ​​of the Bitcoin volatility index suggest that a short squeeze is imminent, if the past pattern continues.

Previous Bitcoin Volatility Index Pattern Suggests Short Pressure Could Happen Here

As explained by an analyst in a CryptoQuant afterthe BTC volatility index has now reached values ​​where a short squeeze has occurred in the past.

The “volatility index” is an indicator that shows how much the price of Bitcoin fluctuates in a day compared to the historical average.

When the value of this stat increases, it means that the price of the crypto has seen higher volatility recently as the price has deviated more from the average.

On the other hand, low readings suggest that Bitcoin has been relatively stable lately as the price has not seen any major moves.

Volatility is often high after a liquidation event. This “liquidation squeeze” happens when the market has too much leverage, and so large swings in price lead to massive liquidations of futures positions.

Related literature | Bitcoin Bearish Signal: Binance Observes Massive Influx of 10k BTC

The price usually crashes during a long liquidation squeeze due to a cascading effect from these liquidations. On the contrary, the price may instead rise during a short squeeze.

Here is a chart showing the trend in Bitcoin volatility over the past six months:

The value of the index appears to have risen and then declined recently | Source: CryptoQuant

As you can see in the chart above, the indicator’s value shot up recently after a long squeeze, but has now fallen again. At the moment, the Bitcoin liquidation index seems to have values ​​around 19.12.

In the chart, the quant has highlighted parts of the past that are relevant to this current trend. It appears that shortly after such a formation, the price has risen sharply with a short squeeze.

Related literature | ‘Bitcoin Rush’: Small Solo Miners Win Gold With Full BTC Blocks

So the analyst believes that the coin may now follow this pattern as well and the price may move back towards $46k to $47k.

However, the quant believes that such a move will only provide short-term relief and Bitcoin will resume its downtrend shortly after.

BTC price

At the time of writing, Bitcoin’s price is hovering around $36.2k, down 5% over the past seven days. In the past month, the crypto lost 28% in value.

The chart below shows the trend in the price of BTC over the past five days.

The price of BTC seems to have moved sideways in recent days | Source: BTCUSD on TradingView

A few days ago, the price of Bitcoin jumped back to $38k, but the recovery did not last long and the crypto fell to $36k.

Featured image from Unsplash.com, Charts from TradingView.com, CryptoQuant.com

Leave a Reply

Your email address will not be published.