Bitcoin Under Pressure Near $40K, Here Are 2 Reasons Why That Could Change Soon
22 April 2022 - 8:00PM
NEWSBTC
Bitcoin remains rangebound in the high $30,000 to low $40,000
areas. The first crypto by market cap has seen its volatility
reduce as several factors contribute to the slowdown across the
sector. Related Reading | TA: Bitcoin Trims Gains, Support
Turned Resistance At $41K At the time of writing, Bitcoin (BTC)
trades at $40,500 with a 6% loss in the last 24-hours and a 1%
profit over the past week. Trading firm QCP Capital believes
Bitcoin has been trading in a larger range as it reclaimed the area
around its current levels. The firm claims that there are 2 main
reasons behind BTC’s recent price action. In addition to the U.S.
Federal Reserve (FED) hinting at an aggressive monetary policy,
there are expectations of Bitcoin and Ethereum revisiting critical
support at $30,000 and $2,500, respectively. These expectations
were generated by former BitMEX CEO Arthur Hayes’s latest post,
“The Q Trap”. In the options markets, traders are preparing for a
potential drop as QCP Capital records a “massive selling of May and
June calls, causing BTC and ETH risk reversal”. These levels
dropped from negative 6% to negative 10%. Conversely, the demand
for BTC and ETH puts has increased. In other words, traders seem to
be hedging for the upcoming crash by buying put (sell) options. If
the price crashes, they will be able to benefit. Ethereum has seen
the biggest uptick in demand for put calls. QCP Capital attributed
it to the delay of “The Merge”. The event is set to combine
Ethereum’s execution layer with its consensus layer and make ETH
2.0 fully operational. Bitcoin Finds Bottom With Stablecoin Craze
Bitcoin’s recent price action characterized by low volatility could
also be the result of the popularization of algorithmic
stablecoins, QCP Capital believes. These digital assets have been
in the crypto space for many years, but Terra’s UST managed to give
them new life. The demand for UST has increased as users want to
leverage the 19% annual percentage yield (APY) offered by Anchor
Protocol. Other projects have begun imitating this model creating
what the trading firm called a “soft floor in the market”. QCP
Capital added: We mentioned in a previous post that the precedent
set by Luna Foundation Guard (LFG) would spread and that has
happened quickly with a wave of announcements from FRAX, NEAR and
TRON (…). Similar to how LFG bought BTC and AVAX, these algo
stables will build their treasuries in the major coins and provide
material support in the market from their buying. The short-term
relief in the market could be translated into long-term pressure.
The trading firm claims that these digital assets could become a
systematic risk for the sector. If the entities managing these
stablecoins buy BTC or ETH to maintain the pegged of their assets,
there is a chance that a de-pegged scenario could increase the
selling pressure in the market. If the stablecoins are at risk of
becoming volatile, the entities will sell their assets to try to
keep the pegged. In any case, QCP Capital and others wonder about
the long-term sustainability of the algorithmic stablecoins. UST,
Terra’s native stablecoins, has been battle-tested, but many wonder
if it will be able to keep its users with the rising competition.
Related Reading | Why A “Boring” Bitcoin Could Be A Good Thing
In the meantime, as expectations of a May/June crash increase and
algo stablecoins proliferate, Bitcoin seems poised to remain
rangebound with short-term price action to the downside. According
to Material Indicators, BTC’s price will seek to take the liquidity
of around $37,000. #FireCharts is showing ~$100M in #bitcoin bid
liquidity between here and $37.5k range. Expecting it to get
filled, but watching to see if #BTCUSDT liquidity moves to the
active buy zone or the buy zone moves to the orders resting on the
@binance order book.https://t.co/26BLOFwenL
pic.twitter.com/NdAGc48yfY — Material Indicators (@MI_Algos) April
22, 2022
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