Happy Hump Day! This morning we erase the board and take a fresh look at the BTC chart. Over the past three months we have been watching two technical formations take place, a longer-term rally, colliding with a shorter-term descending triangle formation. In terms of the old descending triangle formation, we placed the horizontal line of the triangle at ~$10,800. That clearly needs to be adjusted to ~$9,300 BTC, where we have seen support since mid-June. The descending trendline does not need to be changed, just extended forward. We have seen this downward sloping resistance form over the same time period as the $9,300 support. At the moment, it looks like for a break-out to the upside to take place, a rally though $11,000 on large volume must occur. If the $9,300 support breaks down, then the next price target would be in the low $7,000's.
To coincide with chart above, we are currently in a period of BTC “contraction”. In a contractionary period, generally, realized vol will come in, as we wrote about two weeks ago. A selloff in implied vols (BTC Options prices) tend to follow. Below is an updated chart on realized vol, showing the 30-day realized vol at ~65% and the 150-day realized vol in the low 80%’s still.
Implied vols have also been leaking lower, as the latter half of August held just above 80%, however we are now seeing ATM implied vols in the 77%-80% range. Until we see a ‘break-out’ or ‘range expansion’ move in BTC like we saw in late June when BTC ripped from $9,300 to the $14,000 highs, implied vols will likely not catch a serious bid.