When the price of an asset hits its new full day, impulse traders flock because they sense an opportunity to move higher in the trade. The same was observed after the price of Bitcoin (BTC) broke the $ 20,000 barrier on December 16. On December 19, the price reached a daily high of $ 24,197.46, an increase of 21% in four days.
These sharp fluctuations in the price of bitcoin attract traders who use derivatives to try to increase profits or to protect their existing positions by buying protection against the decline. This boosted open interest in bitcoin options to $ 6.5 billion earlier this week.
While professional traders use sophisticated options strategies to establish their positions, retailers usually buy abstract options with the dream of suddenly making a profit on an option contract. This can be seen in the higher open interest rates with a $ 36,000 buyback price and a $ 52,000 call option.
For every option contract, there is a seller, a buyer, and, as a rule, professional traders prefer to sell options contracts and assign a premium when expiration does not matter. Hence, traders must make informed decisions before buying only option contracts.
Bitcoin’s bullish momentum has pushed some currencies higher. Let’s take a look at the top 5 cryptocurrencies that could provide trading opportunities next week.
Bitcoin / US dollar
Bitcoin gained momentum after the price broke the $ 20,000 upper resistance, but a rapid rally in recent days has pushed the Relative Strength Index (RSI) deeper into the overbought zone. This indicates a possible consolidation or correction in the coming days.
Usually, after the price breaks a critical level, such as a historic high, it falls and tries the test level again. In this case, the BTC / USD pair could fall from the $ 25,000 resistance zone to the $ 26,000 level and retest the $ 20,000 breakout level.
If the price rebounds strongly from this support, the bulls will try to resume the bullish trend again. If they succeed, it would mean that $ 20,000 is the new low for the pair.
Contrary to this assumption, if the price remains below the 20-day exponential moving average ($ 20,356) and the support of $ 19,500, the pair could fall to the 50-day moving average of $ 17,960.
Despite the uptrend, the 4-hour chart shows that it is difficult for the bulls to keep the price above $ 23,795.29. This indicates that the bears are trying to stop the rally after the recent sharp bullish move. A negative RSI deviation indicates that momentum may weaken.
If the price falls below the 20-EMA, the pair may fall to the support level of $ 22,272.63. This is an important short-term level to be aware of because short-term traders can profit from a breakout. This could quickly bring the price down to 50 SMA and then $ 20,000.
This offer will be canceled if the price rises and continues to exceed $ 24,000. Such a move would indicate that momentum traders control everything.
ETH / USD
ETH broke out of the ascending triangle pattern on December 16 and the price rallied to $ 676,325 on December 17, but the bulls failed to hold higher levels, as evidenced by the long week in the afternoon.
On the other hand, the bears did not allow the price to fall below the immediate support at $ 622,807. The price is currently between $ 622,807 and $ 676,325.
If the bulls manage to push the price back above $ 676,325, the next part of the trend could begin and could reach the target pattern of $ 763,614. Bullish moving averages indicate a bullish advantage.
Conversely, if the price falls below $ 622,807, the ETH / USD pair could fall to the 20-day moving average ($ 599). If the price rebounds strongly from this support, the bulls will try to resume the bullish trend.
The trend will change in favor of the bears if the price falls below the trendline in the triangle.
The 4-hour chart depicts a symmetrical triangle formation that usually acts as a continuation pattern. If the bulls manage to push the price through the triangle, the pair could resume the trend.
Conversely, if the price falls below the triangle, it could fall to the $ 622,807 support level. If the price falls below the 50-SMA, the pair may lose speed and move towards the trendline in the triangle.
LTC / USD
Litecoin (LTC) gained momentum after the completion of the symmetrical triangle on December 16. The triangle eruption targeted $ 119.77 and was reached on December 19.