Bitcoin volatility at all-time lows despite 15% crash, is a recovery rally on the cards or more downside?

Bitcoin price has left holders dumbstruck after a 55-day consolidation streak ended with a bang with a 15% correction that wiped billions in open interest and liquidations. As BTC hovers around $26,000, onlookers are left with two thoughts – “Why did Bitcoin crash?” and “Where will it go next?” This article breaks down these two trains of thought.

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Bitcoin price crash and the reason behind it

While there are many theories on why the Bitcoin price crashed, two stand out – coiling volatility and forced liquidations. Just before the 2023 rally formed a top at $31,500, BTC was already trading in a tight range. Coupled with macroeconomic conditions and rangebound movement, the volatility of BTC hit all-time lows. 

BTC volatility index 

This tight range continued for nearly 55 days when Bitcoin price traded inside a $2,000 range. Over its 13-year lifespan, BTC has embarked on many low-volatile phases, but each time BTC’s range breached, it triggered an explosive move. 

Technically, this breakout move, in hindsight, was likely. 

The second reason is that this move was due to SpaceX’s alleged reduction in the Bitcoin balance sheet. Although rumors, this is also one reason for the sudden crash in Bitcoin price. 

QCP Capital notes in their newsletter that a “large BTC and ETH gamma related perp liquidations on options exchanges Deribit and OKX, which together accounted for an outsized 50% of all liquidation flow.”