Bitcoin may have an increase in volatility when the new weekly and monthly candles open, especially after a major short-term correction.
The price of Bitcoin (BTC) faces two crucial events on December 1st, right after the weekly and monthly candle closings. The next weekly candle closing is particularly remarkable because it can mark the first weekly red candle since the end of September.
The monthly candle will be significant as it would mark the highest closing in Bitcoin history if the price remains above $13,791.
Bitcoin’s realized volatility. Source: Cointelegraph Markets, Digital Assets Data
There are three main factors that can cause Bitcoin’s volatility to peak at weekly and monthly candle closing. The factors are the overall uncertainty surrounding the BTC price, record activity in futures and open contracts trading, and the overly extended weekly chart.
Meanwhile, traders have been cautious, predicting a downturn in the short term, despite a price recovery of around $16,500 on November 28.
There are two main trends that may be driving BTC’s recovery. First, Guggenheim Investments, a global asset management company with over $233 billion in assets under management, has secured the right to invest $500 million in the Grayscale Bitcoin Trust.
In the US, where there is no publicly traded fund in Bitcoin (ETF), the Grayscale Bitcoin Trust is the first entry point for most institutional investors. Deribit informed that the news triggered significant buying activity in the options market. The company said:
„News from Behemoth Guggenheim Macro Opps fund seeking to allocate US$ 500 million, promulgated over the weekend, caught those in short positions + TA shrinkage allocators by surprise when BTC jumped 2,000. The quiet options market was ignited.
Second, high net worth investors and whales may be buying the reduction in expectation of Monday. In recent weeks, as quantitative traders pointed out, most of the buyers demand came from the USA.
Some speculate that demand is coming from time-weighted average price (TWAP) algorithms, commonly used by institutions and funds. As TWAP algorithms would be activated again on Monday, this could increase buyer demand for BTC.
Traders are generally uncertain about the direction of BTC’s price
There is a high degree of uncertainty in the cryptomino market at the moment, as traders are divided on where the price will go next.
Some are confident that BTC has probably reached its lowest level over the weekend due to market trends. For example, Avi Felman, chief trader at BlockTower, said that at Coinbase the recent downturn has moved BTC into stronger hands.
Settlements during a bullish market can be overwhelming, especially as traders often look for reasons to sell. As such, overbuyers are caught in the local tops, leading to cascading settlements. But BTC often tends to rebound when traders expect more decline and market sentiment reaches a low point. Felman explained:
„Good, extended sales from Coinbase at the local low for the first time suggests to me that retail is growing slowly. Reasonably obvious transfer from weak hands to strong hands in the last 48 hours. Retreats in the bullish markets always offer a silver platter of reasons to sell. ”
In addition, several technical indicators signal that Bitcoin is neither overbought nor oversold in lower periods of time.
On the daily chart, for example, the BTC Relative Strength Index (RSI) is around 55. An asset is considered oversold in the RSI indicator if it falls below 35. Therefore, Bitcoin is in a strange position because longer-term charts, like the weekly chart, remain overbought.
This has led traders to predict that a possible correction to the $13,000 to $14,000 support range could occur soon. This high level of uncertainty in the market may cause increased volatility with the opening of new weekly and monthly candles.
Open contracts on futures exchanges would likely increase again, increasing the likelihood of large price movements.
Whales Becoming More Active in BTC Futures
During Bitcoin’s rise in recent weeks, trading activity at major BTC futures exchanges has increased continuously. Despite the recent drop, the amount of open contracts on the main futures trading platforms remains above $1 billion. When