As the closing of the monthly Bitcoin candle (BTC) approaches, signs of increased volatility are emerging. Only four days after the highly anticipated expiry of the Chicago Mercantile Exchange futures contracts and Deribit options, BTC’s short-term direction remains uncertain.
There are three factors pointing to a peak of volatility during the week: prolonged price consolidation, proximity to a fundamental resistance level and the considerable expiration of BTC futures and option contracts.
Bitcoin has been in a consolidation phase for almost a week now.
On August 17, the price of Bitcoin rose to $12,486 on Coinbase, reaching a new high for the year. Since then, the price has consolidated within a narrow range and has not been able to exceed $12,000 again.
When Bitcoin consolidates for long periods without a clear movement of the price in one direction or another, it tends to result in a high volatility. Since August 19, the price of Bitcoin has remained in a range of 4.5%, a narrow range for cryptocurrency.
BTC/USD is approaching a crucial support
The pseudonym trader known as „Mayne“ has stated that the $11,650 support level is crucial for BTC in the short term. Referring to the support range between $11,650 and $11,750, the trader explained:
„If we can stay above the gray zone, a rapid rebound inside it could be ideal to open a long. I think we will reach $12,100. If the gray zone does not hold, I would open a short to $11,100“.
Options expiration is approaching
Although the open interest in the Deribit Bitcoin options market is not as big as June, there are $500 million in open positions for the contract that will close on August 28.
The simultaneous expiration of August options and futures contracts could cause large price movements. One option trader commented:
„It is not the June levels, but still just over $0.5 billion in Open Interest on BTC options currently in contract 28AUG20 on Deribit.
Josh Olszewicz, a well-known technical analyst active in the cryptocurrency market, suggested that the expiry of CME Bitcoin futures could also lead to strong price movements:
„This week CME BTC futures are renewed. You pay attention to a greater activity“.