Bitcoin has been rather tame as of late, at least by its standards.
Over the past few weeks it has gone mostly sideways, with lower highs and higher lows becoming the norm.
We are now entering about 2 weeks of this kind of price action.
(Source: https://www.coindesk.com/trapped-below-7k-is-bitcoin-prepping-for-a-big-breakout/)
As you can see the range is tightening while making lower highs and higher lows.
Cool, so what does this mean?
Well that depends on what you believe, but technical theory would dictate that periods of compressing volatility are often followed by periods of increased volatility.
Many charts would also show that kind of price action as well.
There is an old saying that goes something along the lines of this:
"The wider the base, the higher in space"
Also, there is something along the lines of this:
"The wider the range and the longer the duration of the consolidation zone, the more violent the breakout tends to be"
Which basically means that the longer prices go sideways and consolidate the more violent the move tends to be when it eventually does break out.
Why is this interesting?
This is interesting to me for several reasons.
For one, it is occuring after a prolonged downtrend which would be a sign that the trend is about to change or that prices are getting set to continue in the direction of the prevailing trend. Either way, prices are at an inflection point.
Secondly, it is interesting to me because of the timing of this pattern.
Traditionally the 1st quarter is a weak time of the year for bitcoin and cryptocurrencies.
Plus there is a major tax liability for many cryptocurrency investors coming up in a few days that may have not been the case in years prior.
Overall, we are just getting past the weak time of the year seasonally, and taxes are due in less than a week.
Which makes me think that this pattern is likely setting up to be a reversal pattern and prices are likely to bounce from here.
Meaning that I am anticipating some bullish price action in the weeks ahead.
Stay informed my friends.
