Bitcoin’s monthly close is fast approaching and three factors point toward heightened volatility in the near term. As the monthly candle close of Bitcoin (BTC)
comes closer, signs of heightened volatility are emerging. With just
four days until the highly anticipated CME futures contract and Deribit
options expiration, BTC’s near-term direction remains uncertain.
Three reasons to expect a spike in volatility
over the next week are BTC’s prolonged consolidation, key resistance
level overhead, and the sizable expirations of BTC futures and options
contracts.
Bitcoin consolidates for nearly a week
On Aug.
17, the price of Bitcoin surged to as high as $12,486 on Coinbase,
achieving a new yearly high. Since then, the price has consolidated
within a tight range and been unable to break above $12,000 again.
When
Bitcoin consolidates for extended periods without clear price movement
to either direction, it tends to see high volatility. Since Aug. 19,
Bitcoin price has stayed within a 4.5% range, which presents a tight
range for BTC.
BTC/USD nears a crucial support. Source: TradingView.com, Mayne.
A
pseudonymous trader known as “Mayne” said the $11,650 support level is
critical for BTC in the short term. Referring to the $11,650 to $11,730
support range, the trader said:
“If
we can hold the grey, wick into it could be a long entry. I think we'll
push up to $12.1k. Lose the grey, flip short towards $11.1k.”
Options expiration approaching
Although
the open interest in the Deribit Bitcoin options market is not as high
as June, there is $500 million worth of options open for the Aug 28
contract.
The simultaneous expiration of August options and
futures contracts could cause large Bitcoin price movements. One options
trader said:
“Not at June levels, but still a little over $0.5 billion of BTC option OI currently sitting in 28AUG20 on Deribit.”
Josh
Olszewicz, a popular cryptocurrency technical analyst, hinted that CME
Bitcoin futures expirations could also lead to intense price action. He said:
“CME BTC futs [futures] roll this week. Watch for increased shenanigans.”
Bitcoin futures contracts on CME that face expiration. Source: Josh Olszewicz.
Bitcoin needs to overcome the $11.9K resistance level
Since
early August, the price of Bitcoin has rejected at the $11,900 level
twice, both seeing a relatively large sell-off shortly thereafter.
In
the last 24 hours, Bitcoin rejected from the $11,800 to $11,900
resistance range once again. If BTC continues to fall in the short term,
it could print a lower high formation on lower time frame charts.
Fundamentals drop off slightly
According to researchers at Glassnode, on-chain fundamentals slightly dropped off in the past week. They said:
“Bitcoin
on-chain fundamentals decreased slightly during Week 34. GNI lost 6
points, dropping from 71 to a current level of 65 points. This was due
mostly to a decrease in the Sentiment subindex, while Network Health and
Liquidity also saw small decreases.”
The confluence
of a minor decline in fundamentals, prolonged consolidation, options
expiration, and a key near-term resistance raises the chances of a major
price reaction.
source link : https://cointelegraph.com/news/3-reasons-why-bitcoin-price-volatility-may-spike-before-the-monthly-close
