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Bitcoin Logs Biggest Weekly Gain Since June
BTC: Price: $9,350 | MCAP: $168.80 Billion | 24-Hr Volume: $35.93 Billion
Short-term trend: Pullback likely
Bitcoin jumped 16 percent last week, confirming the biggest weekly gain since June. The big move invalidated a bearish lower highs setup on the daily chart, confirming a bullish reversal. So far, however, the cryptocurrency, has repeatedly struggled to keep gains above $10,000 over the three days – a sign of temporary buyer exhaustion.
Further, the 4-hour chart is reporting a bearish divergence of the relative strength index. Bitcoin, therefore, risks revisiting the former resistance-turned-support of $8,820 in the next 24 hours or so.
Some prominent analysts are worried that the market optimism with respect to China accelerating the adoption of blockchain technology is premature, as the nation is building its own digital currency and may continue to block BTC and other cryptocurrencies. BTC, therefore, could trim at least a part of the gains seen on Friday.
Long-term trend: Bullish
Bitcoin's long-term outlook is bullish, as mining reward halving is due in May 2020. The bullish case looks stronger if we take into account the strengthening narrative that the top cryptocurrency is a digital gold and a hedge against inflation.
Many observers believe the negatives interest rate era could force traditional investor to pour money into cryptocurrencies. After all, BTC is the best performing asset of 2019 and possibly of the decade.
Long-term technical studies are also biased bullish. For instance, the 100- and 200-period averages have produced a bullish crossover on the three-day chart. A similar bull cross in March 2016 was followed by a 21 month bull market.
The bullish view would be bolstered if and when prices exit the four-month falling channel seen on the weekly chart, confirming a resumption of the rally from lows near $4,000 seen in April.
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Bytom Goes Ballistic On China News
BTM: Price: $0.16 | MCAP: $165.6 million | 24-Hr Volume: $143.6 million
Short-term trend: Pullback
BTM is today's best performing crypto within the top 100 at CoinMarketCap, up x percent on the day and continuing on from a large rally after positive news from China.
BTM joins a number of other Chinese projects including NEO, Ontology and QTUM after announcements from China's President Xi Jinping looking favorably on bitcoin and blockchain technology.
Today's daily candle is showing signs of exhaustion, seen by the large topside wick and coupled with an overbought daily RSI hinting at a pullback in the short-term.
Long-term trend: Bullish
BTM crossed above the 200-day moving average on Oct. 27, marking a long-term bear-to-bull trend change.
A new daily candle formation above $0.18 is required for a convincing move needed to entice further investment for the long-term, otherwise risk a major pullback to prior high's at $0.10.
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| Nexo Held Underwater
NEXO: Price: $0.09 | MCAP: $55.8 million | 24-Hr Volume: $11.1 million
Short-term trend: Bearish
The 3-day chart for NEXO shows a long topside wick demonstrating greater selling pressure during that period, hinting at a potential deeper pullback in its price should conditions remain unchanged.
Down 4.14 percent on the day, NEXO is presenting mixed signals with a bullish RSI above the neutral 50 line and greater selling momentum as seen by the daily Chaikin Money Flow (CMF).
Long-term trend: Neutral
Nexo requires a firm close above $0.12 in order to reverse recent losses and begin attracting fresh investment, otherwise it risks a deeper drawdown from recent highs clocked on Oct. 19 and Oct. 25.
Wait for a buy signal in the form of a strong 3-day candle close coupled with support bullish volume and a bullish trending RSI and CMF.
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Bitcoin's at the money (ATM) volatility, which measures the implied mid-rate volatility for an ATM option for a specific expiration date, has jumped sharply following Friday's sudden 40% percent rise from $7,600 to $10,350.
A rise in implied volatility (IV) makes options costlier. Hence, traders often sell (write) options when the IV is high and buy options when the IV is low.
So, now is not the time to buy options, as bitcoin usually consolidates after a big move, leading to a drop in the implied volatility and option value.
The IV drops in a range bound market, making options cheaper and the volatility picks up sharply after a prolonged period of consolidation ends with a big move in either direction, making options costlier.
Hence, seasoned traders often buy both call and put when expecting a big move following a prolonged consolidation and write (sell) options when anticipating consolidation following a solid rally or a sell-off.
A call option gives the buyer the right, but not the obligation, to buy the cryptocurrency at a specified price within a specific time period. A put options gives the buyer the right, but not the obligation, to sell the cryptocurrency at a specified price within a specific time period.
In bitcoin's case, the best time to buy options is when the one-month implied volatility is below the life time average of 80.81% and near the all-time low of 55.46%. On the other hand, a trader would want to sell options when the volatility is closer to or above the life time high of 104.42%.
Non-directional strategies
Straddles and Strangles are some of the most commonly used non-directional high volatility option strategies. A straddle is implemented by buying at-the-money call option and simultaneously buying at-the-money put option of the same underlying security with the same expiry.
For instance, if BTC remains sidelined near $9,500 for the next two weeks, the IVs would drop and calls and puts would become cheaper.
As noted earlier, a low-volatility consolidation is often followed by a big move in either direction. So, after two weeks, a seasoned trader may buy a call option and a put option at $9,500 strike price expiring in one month.
If the range ends with a bullish move similar to the one seen on Friday, the call option would yield significant returns. Meanwhile, the put option would generate returns if the range ends with a sharp drop similar to the one seen on Nov. 14, 2018.
The maximum loss, if market remains flat till expiry, will be limited to the extent of the premium paid while purchasing options. |
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| Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments. |
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IV Spikes