Bitcoin Trading: Are We Primed For A Major Move Higher?

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Yesterday we wrote about the low volatility after Mt. Gox’s accounts were seized. The following graph from that article illustrates how we haven’t seen volatility this low on Mt. Gox since December of 2012.

rate volatility

Looking back to that December low, there was a clear consolidation phase before the major run-up. Notably,  the broader consolidation at that time lasted several months. The same pattern occurred in mid-March 2013 around $45, with a tempered ramp before a consolidation, followed by an upward inflection in prices.

Late Dec 2012 v2

December 2012 price consolidation

Mid March 2013 v3

March 2013 Price Consolidation

Recent Price action v2

May 2013 Price Consolidation

Markets frequently see periods of low volatility and consolidation around a price level before making large moves higher. These consolidations help establish a foundation and confidence around a given price and burn off resistance sellers. There’s also another analogous situation unfolding: the current price level is roughly 50% of the peak high in April. The 2011 high saw consolidation around the 50% mark, at $14.

2011_high_volatility

Not to be discounted in these considerations are the externalities adding to the current market dynamic. Headwinds for newcomers who may have used Dwolla to enter the market will slow inflow to the primary exchange, while tremendous momentum from new companies and the related growth in committed venture capital will drive positive underlying fundamentals.

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