Calm Before the Storm? Crypto Trading Exceptionally Flat Before Some Potentially Huge Moves

Since taking a hammering 1-2 weeks ago, crypto markets seem to have found a tranquil nest of stability in the

Since taking a hammering 1-2 weeks ago, crypto markets seem to have found a tranquil nest of stability in the eye of the storm enveloping the crypto world. Since the big drop last Thursday, digital coins have traded very stably, with Bitcoin barely budging from the $440-460 range on Bitstamp (update: within the past 3 hours, BTC did drop by as much as $14 and has partially recovered its losses).

BTC-USD, April 9

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It would even be tempting to liken current behavior to that of 2 months ago. Bitcoin was trading on MtGox solidly within the $920 range for quite some time. It was the flattest trading observed in months, and led “someone” to speculate that perhaps we’ve graduated to a new era of fiat-like stability. Perhaps the market has found a stable fundamental value, at least for its primary cryptocurrency. Yes, there were some minor kinks at MtGox which need to be ironed out, but aside from that, the market has spoken. The rest is history.

Short-term traders can be lulled into focusing on the mini swings contained within a relative period of calm and forget to zoom out to the bigger picture. Then they are unexpectedly hit by a tidal wave of news or sentiment that washes away their positions and sends them scrambling for the safety of the shores.

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Here, the likelihood of big moves- in either direction- within the next 1-3 weeks looms large. The market has already priced in the partially confirmed rumors of an impending crackdown by the PBOC and hedged off its extreme lows near $415.

The question is what happens come April 15- or later. An absolute confirmation of the rumors will send prices well below $300 immediately, with further bleeding thereafter. The unlikely event of a confirmation to the negative or some equivalent will push prices toward the mid-upper $500’s, as traded before the rumors started. Some traders would love to play the butterfly option spread, perhaps a possibility one day now that swaps are around.

We also shouldn’t forget that there were those in China who thought the world was coming to an end January 31st, the Chinese new year. So the dates can sometimes get confusing, as do the events surrounding them. Here though, it would seem that the $200+ plateau enjoyed by Bitcoin since its run-up last fall is hanging in the balance.

As one trader in the BTC-e trollbox recently put it, “long sideway meens (sic) skyrocket up or down.” According to another, “Evening in China, no news from PBOC => bullish” and “19:04 in China, normally pump time”. Maybe they’re right again.

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