The trading range of Bitcoin is becoming tighter as speculators seek positions on the correct side of a potential break-out.
The optimistic ones are crowding into trades when it’s crossing above $10000, while negative thinkers are quitting when it approaches $12000, according to an analysis of Bitstamp’s volume-weighted prices over the past month.
Senior market analyst at Oanda Corp. Craig Erlam says: “It’s irrational how fixated people become around psychological levels. It’s like the Dow people fixated on breaking 20000” (referring to the Dow Jones Industrial Average testing that level repeatedly). It was broken about three years ago and is now above 25000.
Distinguishing the precise levels that trigger adrenaline in the market is essential for trading the world’s leading cryptocurrency. That’s because, with scant fundamentals and an obscure ownership structure, knowing the pressure points of others can be eminent for investors.
The data currently underline rising confidence in the digital coin when it holds above the round number of $10000, and a thinning out near $12000. It’s only closed above the higher number five times this year. BTC is demonstrating an almost inverse bell curve of prices, the analysis shows. “You’re noticing it range-bound now. And the highs it’s been striking are lower and lower. When it breaks out of this range, you could see a fairly active move down,” said Erlam.
Indeed, Bitcoin’s volatility has decreased over the past month. Its 30-day medium daily move is 2.4% up or down, compared with 5.5% back in mid-July, according to a separate Bloomberg study. A comparative study using data from Coinbase Inc. also displayed a strong concentration at $10000, though less so approaching $12000.