Bitcoin

Bitcoin price could show a lot of volatility in early December

The price of Bitcoin (BTC) will be exposed to two crucial events on December 1st, immediately after the weekly and monthly candles end.. The upcoming weekly candle closing is especially noteworthy because could mark the first red weekly candle since late September.

The monthly candle it will matter ever since This would be the highest closing price in Bitcoin’s history if the price were above $ 13,791.

Bitcoin effective volatility. Source: Cointelegraph Markets, Digital Assets Data

There are Three key factors that could make Bitcoin volatility skyrocket when closing the candle weekly and monthly. The factors are that general uncertainty about the price of bitcoin, Record futures trading activity and open interest as well as the overstretched weekly chart.

Bitcoin price could show a lot of volatility in early December
Bitcoin price could show a lot of volatility in early December

Meanwhile, Traders have become cautious and expect a short-term pullback despite the price surge to around $ 16,500 on November 28th.

There are two major trends that could fuel the BTC price rally. First, Guggenheim Investments, a global asset management company with more than $ 233 billion in assets under management, secured the right to invest $ 500 million in the Grayscale Bitcoin Trust.

In the USAwhere there is no Bitcoin Exchange Traded Fund (ETF), The grayscale bitcoin trust is the first entry point for most institutional investors. Deribit reported that the news sparked significant buying activity in the options market. The Company said What:

“The Behemoth Guggenheim Fund’s $ 500 million macro opportunity reports, which were released over the weekend, took the withdrawal short allocators and technical analysts by surprise when BTC bounced $ 2,000 off the lows The quiet options market ignited over the weekend. December purchases, financed by sales; hedging liquidated. “

Secondly, wealthy investors and whales could buy before Monday during the slump. For the past few weeks as a quant trader they pointed outMost of the buyer demand came from the US.

Something they speculate This demand comes from TWAP (Time Weighted Average Price) algorithms typically used by institutions and funds. Since the TWAP algorithms will be reactivated on Monday, this could increase demand from buyers of BTC.

Traders generally aren’t sure which way Bitcoin’s price is going

There is currently a high level of uncertainty in the cryptocurrency marketas the dealers are divided as to where the price will go next.

Some are confident that the weekend Bitcoin price has likely bottomed out due to market trends. For example, Avi Felman, Head of Commerce at BlockTower, said that On Coinbase, the recent pullback resulted in BTC being transferred to stronger hands.

Selling during a bull market can get excessive, especially as traders are often looking for reasons to sell. Over-leveraged buyers are therefore trapped in local highs, leading to cascading sell-offs. But Bitcoin price tends to rise frequently as traders expect more losses and market sentiment bottomed out. Felman explained::

“Coinbase’s decent and extensive sale to local soil for the first time during this rally suggests retail is slowly recovering. A fairly obvious switch from weak to strong hands in the past 48 hours. The pullbacks in the bull markets are occurring.” You always have endless justifications for selling. “

Furthermore, Various technical indicators suggest that Bitcoin is neither overbought nor oversold in shorter periods of time.

On the daily chart, for example BTC’s Relative Strength Index (RSI) is around 55. An asset is considered oversold on the RSI indicator if it falls below 35. Hence, the price of Bitcoin is in a difficult position because of Wedding charts like the weekly chart remain overbought.

This has led traders to do so forecast a possible correction in the USD 13,000-14,000 support area that could happen soon. east A high level of market uncertainty could lead to an increase in volatility how to open the new weekly and monthly candles.

The open interest in futures exchanges is likely to rise againwhich would increase the likelihood of large price movements.

Whales are getting more active with Bitcoin futures

During the Bitcoin rally in recent weeks, trading activity on the major BTC futures exchanges has increased continuously. Despite the recent decline, open interest in major futures trading platforms remains over $ 1 billion. When the open interest is high, the likelihood of a bullish or bearish contraction increases, which can lead to strong volatility spikes.

Bitcoin futures volumes. Source: Cointelegraph Markets, Digital Assets Data

Trading activity in Bitcoin futures has increased significantly on the Chicago Mercantile Exchange (CME) in particular. Interestingly, Arcane Research reported on this Large traders with a minimum position greater than 25 BTC have more than doubled in CME in 2020.

The arcane researchers stated that this trend shows an increase in institutional demand for bitcoin. Increased business activity at CMEwhich is adapted for accredited and institutional investors, can lead to increased short-term volatility due to large trade sizes. The researchers said that:

“Large traders hold at least 5 futures contracts, which corresponds to a minimum of 25 BTC (5 BTC per contract). The average in 2019 was 45 large traders with no significant growth throughout the year. That number more than multiplied in 2020 and we saw a new record high of 102 top traders two weeks ago. This is perhaps one of the best signs of increasing institutional demand for Bitcoin exposure, and we already know that investors like Paul Tudor Jones are part of this growing group in CME, currently the second largest derivatives market for Bitcoin. “

Although institutional demand for Bitcoin has increased, The futures market continues to be an important volatility factor.

Cointelegraph reported earlier this week that when the price of Bitcoin fell from $ 19,400 to $ 16,200 largely due to cascading liquidations, Futures contracts worth over $ 400 million were wiped out for Binance Futures alone.

The new weekly candle is a big variable

Bitcoin will have a new weekly candle popping up for the next 48 hours, but the variable is still the overbought nature in the weekly timeframe.

The weekly chart’s RSI is 88, and if an asset’s RSI is above 75, it is considered overbought. The weekly candle is also well above the short-term moving averages (MA), namely the 5-, 10- and 20-day MAs.

BTC / USDT (Binance) weekly chart. Source: TradingView.com

Traders expected a correction as the weekly chart is overstretched. It would be more sustainable for Bitcoin price to consolidate above the short-term MAs as this would give the derivatives market and demand from spot buyers time to catch up.

In addition, the monthly Bitcoin candlestick chart is even more overloaded than the weekly chart. The MAs for 5, 10, and 20 days are $ 13,129, $ 10,778 and $ 9,685, respectively, and are well below the current market price..

However, it remains uncertain whether technical data alone will lead to the price of Bitcoin being corrected for the foreseeable future. If institutional buyers like Guggenheim continue to make headlines in the Bitcoin market, it could attract more buyers and retail interests in the short term..

Historical volatility of Bitcoin. Source: Highcharts

Historically at first December has always been very volatile for the price of Bitcoin. Although there was relatively little volatility in December 2019, it was over There were large volatility in prices in 2017 and 2018, including Bitcoin price’s all-time high of nearly $ 20,000 and the bear market low, respectively..

If a similar pattern emerges, the price of Bitcoin could see an increase in volatility towards the end of the year.

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