Bitcoin’s price fell sharply last week. However, he has already started to recover since the weekend.
This strong volatility may continue as of Tuesday (1). According to analyst Joseph Young, Bitcoin will face two crucial events tomorrow.
The events will occur shortly after the closing of the weekly and monthly candles. The next weekly candle close is particularly noteworthy: it can mark the first red weekly candle since late September.
The monthly candle will also be significant as it may mark the highest close in Bitcoin history. For this, the price remains above $ 13,791.
For those who operate in reais, the price is equivalent to R $ 73 thousand, well above the current quotation of our currency.
For Young, there are three main factors that can cause Bitcoin’s volatility to peak at the weekly and monthly candle close.
- General uncertainty around Bitcoin price;
- Record activity of futures and open contracts trading;
- Weekly chart too extended.
Traders uncertain about Bitcoin price
There is a high degree of uncertainty in the cryptocurrency market at the moment. That’s because traders are divided over which direction the price will go.
Some are confident that the worst is over. For them, the fall of last week caused Bitcoin’s lows due to market trends.
For example, Avi Felman, chief negotiator at BlockTower, shares this view. For him, data from Coinbase shows that the drop has caused Bitcoin to be transferred to stronger hands.
“Coinbase’s decent and extended sales at the local low for the first time, this high suggests to me that retail is growing slowly. Reasonably obvious transfer from weak to strong hands in the past 48 hours. Downturns in bull markets always offer a silver tray of reasons to sell, ”he said.
These “holders” would not be interested in making more sales. As a result, there will be less Bitcoins on the market, which can raise the price – or at least prevent further falls.
Whales resume activity in the future market
During the rise of Bitcoin in recent weeks, trading activity on major futures exchanges has steadily increased.
Despite the recent decline, the number of open interest contracts on the main futures trading platforms remains above US $ 1 billion. There are more than R $ 5.3 billion at the current price.
This is an interesting indicator. When the number of open interest contracts is high, the probability of a short or long tightening increases. As a result, large spikes in volatility can occur.
THE Chicago Mercantile Exchange (CME), in particular, saw a notable increase in Bitcoin futures trading activity.
Data from Arcane Research shows that traders who hold a minimum position of more than 25 BTC more than doubled at CME in 2020.
New weekly candle
Bitcoin will see a new weekly candle emerge in the next 48 hours. However, one of the main indicators continues to indicate overbought in the weekly period.
The Relative Strength Indicator (RSI, in free translation) of the weekly chart is at 88. When the RSI of an asset exceeds 75, it is considered overbought.
The weekly candle is also significantly above the short-term moving averages (MAs), that is, the MAs of 5 days, 10 days and 20 days.
The over-extended chart has led traders to expect a correction. If Bitcoin were to consolidate above short-term moving averages, there would be a more sustainable rise.
But whether technicians alone would make BTC correct in the near future, it remains uncertain. After all, institutional investors continue to buy in large quantities.
The most recent was the manager Guggenheim, who announced the interest of investing up to R $ 2.6 billion in Bitcoin. This may attract additional buyers and retail interest in the short term.
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