Bitcoin volatility has plummeted, and that could be signaling a bottom, market watcher says

It's no secret that bitcoin's price has seen a stunning descent this year amid ongoing regulatory scrutiny, the birth of its futures market and exchange hackings.

Less clear to cryptocurrency traders, however, is what to make of the cornerstone cryptocurrency's realized volatility.

Bitcoin's rolling 30-day annualized volatility has sunk to around 61 percent, up modestly from its low of 50 percent earlier this month, according to an analysis from Pension Partners. Still, this volatility pales in comparison to the annualized volatility seen last year, north of 150 percent.

Ultimately, after its volatility has become this depressed and the cryptocurrency has lost as much as 70 percent from its December peak, I believe the selling has become exhausted, and a bottoming process can begin.

Coming back down to Earth

Bitcoin topped out in the midst of the futures contract launches; this was a big step in the asset's maturation. There was tremendous speculation, and a sort of fear-of-missing-out trade sent prices skyrocketing too high, too quickly. The sell-off since then has wiped out most, if not all, of the over-enthusiasm.

I like to say that a bottom is a process, not a price. Now that the price and volatility have come back down to Earth, this bottoming process can begin. I see significant upside from here in the long-term.

Levels to watch

As for the near term, a bottom would occur more quickly and more constructively if the recent low of $6,000 per coin holds. However, the 100-week moving average is down near $4,550, so traders will be watching that level.

To the upside, I have consistently said $10,000 is a crucial line in the sand, even advising to sell against it. Meanwhile, the six-month downtrend remains intact until a close above $11,300, and the near-term downtrend remains intact until a close above $8,500. Its price Tuesday morning as hovering about $6,700, according to Coindesk.

Vote to see results
Total Votes:

Not a Scientific Survey. Results may not total 100% due to rounding.


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more