As the monthly Bitcoin candle close (BTC) approaches, signs of increased volatility are emerging. With only four days remaining until the upcoming expiry of the CME futures and withdrawal options, the near-term direction of BTC remains uncertain.
Three reasons to expect volatility to rise over the next week are the continued consolidation of BTC, significant overheads at resistance levels, and the massive expiry of BTC futures and options.
Bitcoin is standardized for about a week
On August 17, the price of Bitcoin on Coinbase rose to $ 12,486, marking its highest level in the new year. Since then, the price has consolidated in a tight range and failed to break above $ 12,000.
When Bitcoin is consolidated over long periods of time without visible price movements in both directions, there is high volatility. As of August 19, Bitcoin’s price was in the 4.5% range, which is a narrow range for BTC.
A trader under a pseudonym “Mayne” said the support level of $ 11,650 is critical for Bitcoin in the short term. Regarding the support zone from $ 11,650 to $ 11,730, the trader said:
“If we can keep the gray, the wick could be a long entry. I think we will raise up to $ 12.1K. Lose the gray and go towards $ 11.1K.”
Expiration options approaching
Although the open interest in the Deribit Bitcoin options market is not as high as it was in June, the August 28 contract contains $ 500 million in options.
Expiry of options and August futures could lead to major movements in Bitcoin prices. One options trader said:
“Not at the June level but there is still just over $ 0.5 billion in the BTC OI option currently in Deribit at 28AUG20.”
Josh Olszewicz, a renowned cryptocurrency technical analyst, suggested that expiring CME Bitcoin futures could also trigger intense price movements. He said:
“CME BTC Futs [Futures] is trading this week. Watch out for more scams.”
Bitcoin needs to break the $ 11.9000 resistance level
Bitcoin has dropped to $ 11,900 twice since early August, and both saw relatively large selloffs soon thereafter.
Over the past 24 hours, Bitcoin has again declined the $ 11,800 resistance zone to $ 11,900. If BTC continues declining in the short term, it may print a higher low formation on the lower timeframe charts.
The basics go back a little
According to researchers at Glassnode, the fundamentals in the series have slipped slightly over the past week. They said:
“Bitcoin fundamentals in the chain declined slightly in Week 34. Gross National Income lost 6 points and decreased from 71 to the current level of 65. This is mainly due to the lower sentiment sub-index, while network health and liquidity also registered slight declines.”
The coexistence of a slight decline in fundamentals, continued consolidation, option expiration and short-term major resistance increases the likelihood of a larger price reaction.