Max boredom: potential Bitcoin scenario with low volatility until 2021
The price of Bitcoin (BTC) increased by 3% in the last 24 hours from $10,322 to $10,680. But BTC still faces a significant resistance level around $11,000 and has seen low volatility since Sep. 3.
The declining open interest of the futures market and the stagnant spot market volume raise the probability of low volatility.
Low volume, low open interest and major Bitcoin resistance ahead
Technically, Bitcoin is in a position where it has risen above a crucial level at $10,570, which has previously acted as a resistance area. However, the resistance range from $11,000 to $11,288 serves as a roadblock for an explosive rally.
The daily chart of Bitcoin. Source: TradingView.com
The confluence of the lackluster open interest and volume, combined with the major $11,000 resistance level, could cause BTC’s volatility to remain low for an extended period.
The aggregated open interest of the Bitcoin futures market declined from $5.7 billion to $3.8 billion in the past month. The data from Skew shows open interest, which refers to all long and short positions in the market, has stayed stagnant.
The spot volume of Bitcoin shows a similar trend. The spot volume of Bitcoin remained below $500 million for most of the past month.
Bitcoin futures aggregated open interest. Source: Skew.com
Bitcoin saw a minor breakout of Bitcoin above $10,500, which traders are generally optimistic about. Yet, predicting a major price movement in the near term could be premature for now due to the resistance above.
If BTC reclaims the $10,500 to $10,600 range as a support, the probability of a new range between $10,500 and $11,000 increases.
Historically, BTC saw extended periods of accumulation and consolidation following a large rally. A consolidation phase allows futures and options markets to neutralize, strengthening the basis for the next rally.
What are traders saying?
Meanwhile, a pseudonymous trader known as “The Crypto Monk” said the weekly chart of Bitcoin shows a neutral trend.
The weekly chart of Bitcoin with key macro levels. Source: The Crypto Monk, TradingView.com
The trader outlined Bitcoin’s resilience above $10,000 and the $11,000 resistance in the near term. He wrote:
“BTC closing the week with a ‘neutral’ candle. But still not the best spot to start shorting and becoming a bear. Expecting a retest of $11k.”
Cryptocurrency derivatives trader Cantering Clark said BTC has successfully reclaimed a historically important area as a support. Clark noted:
“Kick yourself if you were selling after a 20% pullback from the highs into the first test of one of the most significant support and resistance flips we have had in years. Context is everything.”
Not everyone is on the fence
However, one variable that could inject volatility in the near term is the upcoming Federal Reserve meeting. Strategists do not expect any hawkish reaction even with positive economic data and its recently announced Adjusted Inflation Targeting of at least 2%.
The market tends to drop after optimistic jobs report because investors fear that the Fed would tighten financial conditions. This time, the Fed would likely retain a relaxed financial environment, which would most likely benefit both stocks and Bitcoin.
PlanB, the pseudonymous creator of the stock-to-flow (S2F) indicator also believes Bitcoin is on the verge of a major rally if the S2F model keeps following its historic pattern.
