Bitcoin's volatility has been diminishing over the past seven days, oscillating between $41,700 and $43,600.

The futures market's open interest indicates that the low volatility is likely to continue in the short term..

The term "open interest" refers to the total sum of contracts that are actively open in the futures market. If the open interest is high, it means there is a high number of traders betting on Bitcoin price action.

Total Bitcoin futures open interest. Source: Coinglass

Crypto trader and investor Daan Crypto trades pointed out that the open interest of Bitcoin futures is decreasing and may not recover soon. This means that the chances of heightened volatility in the near term should not come as a surprise.

Daan said "#Bitcoin Open Interest is still nowhere close to recovering what it was after last week's flush. Price likely chopping around for a while I'm assuming."

A key support level reflects a trend reversal

Data from TradingView shows that after dropping to $41,000 on Jan. 12, the price of Bitcoin spiked to an intraday high at $43,600 on Jan. 16. BTC has since oscillated within these two levels with no clear directional bias.

The position of the relative strength index (RSI) at 46, close to the middle line validates this reducing volatility as buyers and sellers fight for supremacy.

A closer look at the BTC/USD daily chart shows that Bitcoin appears to be in a new cycle. The chart highlighted Bitcoin's impending breakout as part of a cyclical pattern that Bitcoin has been trading in over the past 20 months.

BTC/USD daily chart. Source: TradingView

As shown in the chart above, this is the second time in two years that BTC has reversed course to head higher following a sudden downtrend.

As such, BTC may turn up from the current levels to rise above the upper limit of the range at $43,600. Higher than that, bulls may push the big crypto higher to confront resistance from teh $45,000 psychological level.

Breaking this level could swee Bitcoin climb toward the much-awaited $50,000 mark. Such a move would constitute a 17% uptick from the current price.

On the downside, a daily candlestick close below the lower limit of the range at $41,700 would spell doom for the bulls. Key levels to watch on the downside are the 50-day exponential moving average (EMA) at $2,251, the 100-day EMA at $39,221 and the 200-day EMa at $35,000.