Volatility

Without volatility, it can be tough to make a profit larger than the fees transacted during said trades. That’s why it’s imperative to recognize how volatile Bitcoin is within your given timeframe. 

 

You can do this quite easily by heading over to here, where the green line represents the Deribit volatility index. The higher this line is, the more volatility BTC is expected to experience, the lower the line is the less volatility BTC is expected to experience. 

 

In order to get a good relative read on what constitutes low and high volatility, try a 3 month or a 6 month view and then compare the current index to its past. 

 

 

At the time of writing we can see that volatility is around its midpoint between the highs and lows of the past 6 months of volatility. 

 

It’s important to recognize how volatile BTC is at the current moment in order to decide the types of trades that you might want to make. For example, if BTC is experiencing a large amount of bullish volatility then if I were to sell and then place bids lower, due to heightened volatility I would place said bids far lower than if BTC was trading on lower volatility. 

 

This is because Bitcoin is a notoriously choppy market, wherein a large selloff tends to precede a large upmove and vice versa. 

 

From this chart alone, you can see just how often a strong move in one direction led to a strong move in the opposite direction (ie. a bart move). 

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