Right in the new month, the crypto market flashed a strong signal. Red has been removed from most of the charts, the state of the on-chain indicators has improved, and the broader market has seen growth.
October 1st was a pretty busy day, with Bitcoin prices rising from $ 43,280 to $ 48,490. This dramatic leap has taken the fear away from market participants. In fact, the F&G (greed and fear) index is 54, a neutral value like Bitcoin magazine reported.
In the past few weeks, however, such an upward trend has not been sustained. The most recent unusual crashes are heavily influenced by the derivatives market. The use of excessive leverage by traders resulted in mass liquidations.
In reality, traders are losing money and no new money is pouring into the ecosystem so the upward momentum cannot sustain itself.
So what now?
Well, it looks like there’s nothing to worry about this time around. Open Interest (OI) and spot trading volumes have been pretty even lately. In fact, at the time of writing, the volume ratio is higher than the open interest ratio, which indicates the presence of moderate leverage in the market.
Even if the Bitcoin price corrects a day or two before going up, the market won’t get as chaotic as it was in mid-August or the second week of September.
Conversely, even if prices rise, the environment will be even more favorable in this phase in order to stay the same.
In addition, the deviation also provides a reasonable period of time. 25% delta is the most common measure of the deviation. The attached graphic below shows the difference 1 week, 1 month, 3 months and 6 months to the previous month. The Y-axis essentially measures the difference in implied volatility (IV) between an identical 25-day call and put order.
A negative market is often at the expense of a decline. In situations like this, most of the time, people buy and hold to hedge the price collapse. However, positive market deviations underscore the bullish sentiment and in such an environment the markets will of course not sell their calls.
Despite the recent decline, it should be noted that both the 1-week and 1-month short-term trends are in positive territory, suggesting that sentiment among traders is quite bullish. At this point it should be noted that an overly positive environment is also not good.
Hence, options traders can be said to get less nervous during this time.
Bitcoin’s IV vs. the RV also predicts an interesting trend at the time of writing. IV represents the fair value of volatility based on market expectations, while RV is the actual level of volatility available in the market at any given point in time.
As shown in the attached chart, IV has completely dwarfed RV in the past few weeks.
This suggests that the expected volatility for Bitcoin is currently higher than what the market is currently experiencing. Such scenarios were observed several times in the past year. During the first stage of a rally, the IV often replaces the RV.
In addition, whenever an uptrend materializes on the chart, the RV crosses the IV. The above scenarios played out particularly during the February rally and a higher peak in July-August.
As a result, the environment is currently favorable for the initial stages of the Bitcoin rally. In addition, a moderately leveraged market also strengthens trust. Given the current projections, it can be concluded that Bitcoin is well on its way to bridging the gap on its forecast ATH.
Is $ 100,000 For Bitcoin Reasonable?
Analyst and economist Alex Krüger examines the fundamental factors that he says could determine whether Bitcoin will soar to $ 100,000 by the end of the year.
According to him, a price of $ 100,000 in three months is not easy to get because the US Federal Reserve tends to reduce the money supply in order to contain inflation.
But Kruger called he will change his mind immediately if a Bitcoin Exchange Traded Fund (ETF) is approved.
“When you see many traders asking for $ 100,000 by the end of the year, which isn’t very encouraging given the Fed’s ‘hawkish’ stance, an approved ETF will change that, though it’s unlikely until tomorrow, 2021. The time will come show it to us, I’ll buy BTC when it’s approved.
The analyst also looks at the performance of the crypto market, which he believes is showing “significant strength” amid the sell-off in the equity markets.
“Crypto assets have shown significant strength in the past two days as the stock market continues to bathe in blood and traders look to sell-offs. Could be driven by capital flows at the end of the month. “
He added that Bitcoin’s chart looks promising despite threats from macroeconomic fundamentals.
“If you follow the chart, the price will stay in the current range for a long time. On the macro side, watch out for the Fed and stock traders who fear a repeat of 2018. I follow the diagram.
If for some reason Bitcoin returns to $ 41,000, prepare for a deeper drop. ”
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According to AMBCrypto