The bitcoin price (BTC) fell by more than 23 percent against the U.S. dollar in the past week, triggering a fierce correction in the cryptocurrency market.
Since falling to $7,700, the bitcoin price has recovered to $8,200, critically avoiding a steep drop to the low $7,000 region to test low-level supports in the short term.
Luke Martin, a cryptocurrency trader, said that an upside to $9,000 is expected for bitcoin following its recovery, which would relieve some of the pressure on the cryptocurrency market.
According to Martin, historically, the expiration of the CME bitcoin futures contracts have had a positive impact on the price trend of BTC.
Last month, for instance, a week following the CME bitcoin futures expiration, the price of BTC recovered by 11 percent against the USD.
“Price had just dropped below 9,600 and it remained to be seen whether BTC price was going to recover and have positive returns after expiration. It did. Still a small data set, but worth paying attention to,” he said.
As a March report from Bitwise Asset Management revealed, the CME bitcoin futures market accounts for a relatively large portion of the daily BTC volume once fake volumes from the cryptocurrency market are filtered.
Earlier this year, the Bitwise research team said:
“And, when you remove fake volume, CME and CBOE futures volume is significant ($91M), especially compared to the real spot volume (35% for Feb 2019). This is good news because it means CME— a regulated, surveilled market— is of material size, which is important for an ETF.”
The potential effect of the CME bitcoin futures market on the price trend of BTC cannot be dismissed. And in the medium to long term, as Bakkt begins to demonstrate meaningful daily volumes, the futures market overall could have a larger impact on the price trend of BTC.
Apart from CME, several technical indicators like the Relative Strength Index (RSI) show that bitcoin is displaying oversold conditions, which could trigger a short-term relief rally.
Alternative cryptocurrencies in the likes of Ethereum and TRON have already started to recover strongly against the USD, with Ethereum rising by 14 percent within a two-day span from $153 to $174.
Traders anticipate that a break below $7,700, which could send the dominant cryptocurrency spiraling down to lower supports in the $6,000 to $7,000 range, is unlikely to happen in the upcoming days.
As Scott Melker, a trader at Texas West Capital said, the short-term bottom at $7,777 could take immense sell pressure to break and until that level is broken, BTC is expected to reclaim some momentum.
“There aren’t many clear levels on the monthly chart, but price bottomed out (thus far) exactly on one of them – $7,777,” he said.
The abrupt drop in the hashrate of the Bitcoin blockchain network also recovered swiftly in the past two days, which some investors regarded as a potential factor behind the drop in the bitcoin price.
Jamseon Lopp, the CTO at CasaHODL, said that the drop in the hashrate could have been caused by something as little as “randomness inherent to finding blocks,” noting that the short-term dip in the hashrate is not of major concern towards the stability of the hashrate of the Bitcoin network.
With sell pressure from the CME futures market removed over the next week or two and investors finding answers to the dip in the hashrate of Bitcoin, analysts generally anticipate BTC to recover to support-turned-resistance levels in the $9,000 region.
Last modified: March 4, 2021 2:40 PM