Bitcoin has spent a better part of the last two weeks trading the range of $6,450–$7,450, with the range further narrowing to $7,000–$7,300 since Thursday.
Bitcoin market volatility has hit three-month lows – marking a price squeeze that could soon pave the way for a big move on either side.
Bearish move ahead?
Uncertainty in both the stock and cryptocurrency markets has declined over the past couple of weeks, largely due to the Federal Reserve’s open-ended asset purchase program and the U.S. government’s massive fiscal stimulus worth trillions of dollars.
However, markets are not out of the woods yet, as the number of coronavirus cases is still rising globally. The coronavirus death toll in the US crossed 40,000 over the weekend with over 744,000 infections, raising doubts over the nation’s readiness to reopen its economy.
Further, oil prices crashed close to a two-decade low below $16 early Monday on concerns of high inventory build-up in the U.S. As a result, equity markets could come under pressure, pushing bitcoin lower.
Put simply, the low-volatility period could end with a downside move, more so, as miner-led selling pressure for bitcoin is currently high, according to crypto asset analytics company CoinMetrics.
On the downside, major support is seen around $6,450, the lower end of the recent trading range.
Some observers may argue that the cryptocurrency is set to undergo reward halving next month and the supply-cutting event could draw bids for the cryptocurrencies, yielding a big move on the higher side.
However, both bitcoin cash and bitcoin SV recently failed to rally on their respective halvings. Litecoin, too, crashed following its halving on Aug 5, 2019. As a result, bitcoin investors may not buy into the bullish halving narrative.
At press time, bitcoin is sidelined near $7,070 and the futures on the S&P 500 are reporting risk aversion with a 1.5 percent drop.
While a breakout above the 100-week average confirmed last week is painting a bullish picture, a sudden move lower cannot be ruled out, with the macro factors looking bearish, as noted above. Further, the weekly chart money flow index shows that selling pressure is currently stronger than buying pressure.
The bullish case would get a boost if prices rise above the recent high of $7,469, opening the doors to the 100-day average at $8,075.