Where is Bitcoin Headed?

Written By: Isha Goel | July 1 2021

As the cryptocurrency market volatility continues to persist, many investors have kept Bitcoin in their portfolios to hedge additional risks presented by other coins. It appears that the ‘hype has left the market’ but an optimistic recovery is still predicted. While the initial crash after April was caused by the regulatory action in China, Bitcoin managed to stay relatively steady despite similar actions in the UK over the Binance Markets. Naeem Aslam, the chief market analyst at Ava Trade mentioned that ‘The king of cryptocurrencies has made a significant recovery from its recent slump… In contrast, the bulls have carried digital assets above their 20-day average.’ He noted that crypto traders should track the currency’s price chart as it approaches its 50-day simple moving average, where the critical level is currently near $38,221.

Credit for Image: Yahoo Finance

Bitcoin’s Resistance Levels

During Asia hours on June 30th, Bitcoin maintained its trading price around the $36,000 resistance and as a result, may face further downside toward the $31,000 support zone after having gone down about 2% in the past 24 hours. Upon taking a look at the chart below, the relative strength index (RSI) peaked on June 29th. This indicates that the stock is overbought and will likely keep sellers active over the short term. This cryptocurrency may continue to experience a longer period of consolidation through August as it was unable to sustain a series of higher price lows over the past few days and selling pressures stabilize from May. The four-hour chart utilizes the 50-period moving average to show that there is initial support at $33,000 but buyers may find more attractive entry levels to be closer to $30,000 once oversold conditions appear on the chart. 

Credit for Image: Coindesk

An Interesting Pattern

As Bitcoin stays stuck trading between $30,000 and $40,000, QCP Capital analysts have noticed an interesting pattern in the price chart on Tuesdays in June. The past four weeks ‘have seen the pair deliver either highs or lows within its range each Tuesday, with this week no exception.’ There was a brief dip below $30,000, which is what set it as the support level and analysts have thus formed a moderately bullish bias as a result. Multiple indicators are flashing an ‘oversold’ for BTC/USD so it is important that the selling pressure decreases to provide an opportunity for an organic run-up to challenge resistance levels. While some of the pressure is assumed to come from institutional investors in the Grayscale Bitcoin Trust, the adoption announcement from El Salvador has also played a role in the recent Bitcoin prices. QCP mentioned that ‘on a broader note, we think that the market might be underpricing the recent acceptance of crypto by sovereigns (El Salvador and Paraguay)’ and ‘these might not be huge countries but we think it is a watershed in BTC’s transition from a speculative instrument to an investment-grade asset.’

Credit for Image: Cointelegraph

Influences on Options Trading

Until prices break through the resistance level, fears of a deeper sell-off persist. The options smile chart below plots implied volatilities against options at various strike prices expiring on the same date where the implied volatility is influenced by the demand for call and put options. It is visible that the option smile for short-date and near-date expiries have a steeper slope at strikes lower than Bitcoin’s current price, which means that ‘investors are continuing to buy protective puts – contracts that give purchaser the right but not the obligation to sell the underlying asset, in this case bitcoin, at a predetermined price on or before a specific date.’ Pankaj Balani, the CEO of Delta Exchange claims that there likely won’t be a bullish trend for a while as Bitcoin’s price remains susceptible to the macro trends of the economy. That said, ‘some observers remain optimistic and are drawing parallels with the price action seen in 2013 when bitcoin crashed from $250 to $45 in April, bringing the bull run to a screeching halt, only to surge to four figures by November.’

Credit for Image: Coindesk

Work Cited

Dantes, Damanick. “Bitcoin Stalls; Could Find Support Near $30K-$33K.” CoinDesk, CoinDesk, 30 June 2021, www.coindesk.com/bitcoin-stalls-support-30k-33k

Godbole, Omkar. “Bitcoin Set for Record Second-Quarter Price Drop.” CoinDesk, CoinDesk, 30 June 2021, www.coindesk.com/bitcoin-set-for-record-second-quarter-price-drop.  

Riaz, Saleha. “Crypto Update: Bitcoin Slides as ‘Hype Leaves Market’.” Yahoo! Finance, Yahoo!, 30 June 2021, finance.yahoo.com/news/crypto-update-bitcoin-recovers-even-as-hype-leaves-market-ethereum-090238946.html.  

Suberg, William. “Coincidence? Bitcoin Saw Its Highs and Lows on ‘Turnaround Tuesdays’ in June.” Cointelegraph, Cointelegraph, 30 June 2021, cointelegraph.com/news/coincidence-bitcoin-saw-its-highs-and-lows-on-turnaround-tuesdays-in-june.