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Bitcoin increases after a tense week

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Redakcja
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5 min reading

Cryptocurrencies increased on Friday after a very volatile week. Bitcoin was standing above $33,000 support during the press time and its slightly flat for the week.

Cryptocurrencies increased on Friday after a very volatile week. Bitcoin was standing above $33,000 support during the press time and its slightly flat for the week. Technical charts show that buyers will remain strong above the $30,000, even though upside momentum is beginning to slow down heading into the weekend. “The possibility of price action dropping into the mid-$20,000 range is alive, but traders looking for a retest of previous all-time highs will likely be disappointed,” Sean Rooney, head of research at crypto asset manager Valkyrie investments, wrote in an email to CoinDesk. 

The latest price of cryptocurrencies are as follows for Bitcoin (BTC) $33422.1, +1.25% and Ether (ETH) $2127.6, -1.43%. In traditional markets S&P 500: 4369.55, +1.13%, Gold: $1808.4, +0.31% with a 10-year Treasury yield closed at 1.358%, in contrast to 1.297% on Thursday. “The May price drop was dramatic, whereas the on-chain reaccumulation of the Bitcoin sold in the downturn into longer-term holders has occurred throughout eight weeks of sideways price action,” Rooney wrote. “This sets up well for an end-of-summer rally heading into the fourth quarter.” 

There are more than 5,000 bitcoins short which were added on the Bitfinex exchange on Thursday. “When shorts close their positions, they do so by going long to offset their short exposure,” tweeted Delphi Digital. The recent expansion in shorts is still below peak levels in June, which depicts that this situation could persist for long as Bitcoin remains an intermediate-term downtrend that started in April. It is most likely that after this extreme situation this could lead to a short squeeze as buyers have started reacting to the oversold conditions, resulting in a price rally. 

Ruffer investments, a U.K. investment manager, booked a $1.1 billion profit from a bitcoin investment in five months, “So, what’s changed? The price,” Duncan Maclnnes, investment director at Ruffer, wrote in a blog. “Last November, we gained exposure to Bitcoin,” Maclnnes wrote. “We viewed it as an option on an emerging store of value with a highly skewed and attractive risk/reward profile.” Nevertheless, theorization of retail and top liquidity pointed out insubstantial market conditions earlier this year, which pushed Ruffer to sell all of its Bitcoin exposure in April.

During the last few weeks, Bitcoin’s association with the S&P 500 has started to increase while on the other hand the correlation with commodities continues to decrease. This split could make bitcoin attractive for investors who are expecting a diversified exposure across equities, commodities and cryptocurrencies. According to Mike McGlone, commodity strategist at Bloomberg intelligence bitcoin will outshine Brent Crude oil this year. “The relative discount in the bitcoin price vs. the premium in crude oil may show that technical and fundamentals are aligned for resuming the upward trajectory in the ratio,” McGlone stated in a report. 

“Akin to similar conditions at the end of 2016, we see the bitcoin-to-crude ratio well poised to resume its uptrend, especially if a new low in relative bitcoin volatility at the end of 2020 is a guide.” Even though bitcoin has gone a bit senseless in a narrow range above $30,000, less than half the all-time high reached just two months ago, most of the options traders are busy as ever, with heavy risk strategies to profit from the cryptocurrency’s on-going price combination. One of the strategies focuses on putting “strong strangles,” which proves bitcoin’s price wouldn’t erupt in the near future.

“Our favourite trade continues to be short BTC strangles within the $30,000 to $40,000 range,” Singapore-based QCP Capital said in a telegram post. “With psychological resistance at $40,000 and strong support at $30,000, there’s a good chance that BTC trades in this $10,000 range in the near future, which would likely cause implied volatility to collapse.” Short strangles usually sells out-of-the-money (OTM) call and provides options with similar expiration dates. OTM calls are the ones which hits the prices higher than Bitcoin’s present level, while OTM places strikes lower than Bitcoin’s going price. USDC is considered as the second-largest stablecoin by market cap, which is capable of becoming “the most widely used iteration of the U.S dollar,” Mati Greenspan, CEO and founder of Quantum Economics, wrote in a note soon after currency’s backer, circle, announced their plans of going public. “At the moment, there is only one that is widely circulated and is compliant with all known U.S regulations, and that’s USD coin,” Greenspan wrote. USDC is achieving more shares as the stablecoin industry continues to grow. However, there are other top decentralized finance (DeFi) sites which provides higher yields for holding up the largest stablecoin USDT than USDC. “Even though tether is more readily available and more liquid, USD coin is just seen as a more stable investment vehicle,” Greenspan wrote. 

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