Bitcoin Volatility Plunging While OI on Binance Is Surging with GBTC Sellers Buying BTC
Trading around $34,500, Bitcoin’s price remains range-bound between $30k and $40k.
The lack of any price action has volatility simply plunging to April levels. Amidst this low volatility, Bitcoin’s correlation with the S&P 500 has started to rise in recent weeks while the leading cryptocurrency’s correlation with commodities continues to fall.
This divergence could make the cryptocurrency attractive to investors who are looking for diversification. Mike McGlone of Bloomberg Intelligence actually expects Bitcoin to outperform Brent crude oil this year.
“The relative discount in the bitcoin price vs. the premium in crude oil may show that technicals and fundamentals are aligned for resuming the upward trajectory in the ratio,” McGlone wrote in a report last week.
“Akin to similar conditions at the end of 2016, we see the bitcoin-to-crude ratio well poised to resume its uptrend, especially if a new low in relative bitcoin volatility at the end of 2020 is a guide.”
— skew (@skewdotcom) July 12, 2021
According to trader CryptoYoda, the fact that the price of Bitcoin failed to break lower may indicate that sellers are now exhausted and might get shaken out with prices moving above recent high boundaries.
But if prices break below the last low, this newly developing trend will be invalidated and will put the momentum back into the bear's hands.
However, if the seller exhaustion theory is, in fact, correct, “we should see a rally from these levels emerging soon,” said CryptoYoda adding,
“tighter setup implies more risk, but excellent reward in case the theory gets confirmed.”
Given that the market has been crabbing since the mid-May sell-off, investors and traders expect Bitcoin to break out of the range and push higher, maybe to form a higher range or finally turn bullish and make its way towards all-time highs.
#btc is gagging for a bullflag break, plus still plenty of virgin beras still larping on the timeline.
its all lining up. pic.twitter.com/wXyDmdNteB
— Bluntz (@SmartContracter) July 12, 2021
Meanwhile, the funding rate on Bitcoin perpetual contracts is extremely low, with the highest being 0.01% while still being negative on several cryptocurrency exchanges, especially and mostly on USDT margin contracts, as per Bybt.
As trader CL of venture capital firm eGirl Capital has been noting this “hypertethermarginization” makes it hard for Bitcoin to go down, and open interest build-up could result in a squeeze that could push price upwards.
In nearly the past 20-days, the OI on Binance Bitcoin futures, where the biggest product is BTCUSDT futures, has seen an increase of 55% to 88.31k BTC.
Additionally, the big Grayscale Bitcoin Trust (GBTC) unlock that will occur this week and will follow into next week is neutral for Bitcoin price, if not bullish, as the bearish impact has already been played out.
“Most GBTC creators are doing arbs; most people getting long are buying in markets. So the unlock prob doesn't really matter for BTC, if people sell GBTC, most will buy BTC against it,” noted Sam Bankman-Fried, CEO of crypto exchange FTX.