Low Volatility Will Not Last

by Alex Benfield
By Alex Benfield

Following the FTX implosion in early November, we’ve seen some uncharacteristically low volatility in the crypto market.

Aside from one brief spike upward in mid-December, prices have remained essentially flat for over a month. In fact, they’ve barely moved at all over the last 18 days.

This is unusual for the crypto market, which has always been known for high volatility that opens the door for many trading opportunities.

On a positive note, this period of low volatility has provided some stability for the market to withstand some negative news.

For example, the ongoing drama with Genesis’ potential insolvency hasn’t resulted in a further sell-off — at least not yet.

Still, the trade-off is missing those opportunities volatility creates. They haven’t been as plentiful over the past month or so, but I’m here to tell you they will return … and likely sooner than you might think.

To start off, while volatility can decrease during market stalemates, it can also increase due to the fear of missing out or fear, uncertainty and doubt.

This suppressed volatility will not last forever, and the action will return to the crypto market at some point.

Looking at Bitcoin (BTC, Tech/Adoption Grade “A-”), we can see some converging trendlines. One of those lines should break, resulting in some eventual price action.

Click here to see full-sized image.

 

Should the black trendline at the bottom of the image above break, BTC will retest the lows of $15,500. And if the green trendline breaks, BTC could break out of the current trading channel to challenge resistance at $25,000.

Ethereum (ETH, Tech/Adoption Grade “B”) is also facing converging trendlines. Though in this case, those lines are much closer after ETH has traded right around $1,200 for over a month now without much action at all, signaling the possibility that bears have run out of steam following the FTX collapse.

Should ETH’s black trendline break, it’ll likely retest the November low of $1,075. On the upside, we will be watching to see if Ethereum can break above the green trendline around $1,350 and get out of this current trading range.

Click here to see full-sized image.

 

What’s Next

2023 is the start of a new year. Frankly, we’re glad to put 2022 behind us.

However, the crypto market still needs to deal with the problems created in 2022, such as the FTX fallout, the ongoing contagion and the current risk-off macro backdrop.

But rest assured, the macro backdrop will eventually change, and the bankruptcies, blowups and fraud that plagued the crypto market in 2022 will eventually resolve.

On that same note, this low volatility could continue for another few weeks, but it too will end at some point.

Let's be honest: 2022 sucked for crypto as a whole.

But 2023 is a new year with new opportunities for the industry to build and grow.

I, for one, am confident that this market and this industry will continue to grow from here and that better times lie ahead.

I’m excited to see what 2023 has in store, and I hope you are as well!

Best,

Alex

About the Crypto Analyst

Alex has been actively researching and investing in cryptocurrencies since 2017. He contributes research and reports to several Weiss crypto publications, with a primary focus on helping to create crypto trading strategies.

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