Bitcoins’s monthly close is approaching soon, and it is being predicted that there will be price volatility in the monthly close. Only four days are remaining until the expiration of Chicago Mercantile Exchange Futures Contracts and Deribit Options. But still, the direction is quite uncertain and unclear.
What are the three reasons?
The three reasons why the bitcoin price volatility may spike includes:
- Bitcoins prolonged consolidation
- Resistance level overhead
- Sizeable expiration of Bitcoin’s futures and options contract.
Let’s look at all these reasons in detail:
A few days ago, Bitcoins price surged to an all-time high, and it was as high as $12486 as per the recent report on Coinbase. Since then the price has consolidated itself within the range of $12000, and it has been unable to break this target. It has been seen that when bitcoin revolution reduces itself for an extended time period, without giving any apparent price movement and without moving direction to any particular end, it can be said that it tends to witness high volatility. Since last year August, bitcoin has seen movement and price range within 4.5%, and thus, it is being indicated that there are chances of tight fields for bitcoin.
Another primary reason for the price volatility of bitcoin can be attributed to the approaching expiration. Although the open interest in the bitcoins option market is not too high, there are options worth $500 free for the upcoming contract. Many observers and market researchers are of the opinion that the simultaneous expiration of bitcoin futures and options can be one of the significant causes of the price volatility of Bitcoins. One of the famous bitcoin analysts is of the opinion that the CME bitcoin expiration can also intensify the bitcoin price action.
Since early August this year, bitcoin has rejected at the level of $11900 twice, and it has been seen that both these times, a relatively more massive sell-off was seen later on. Even in the last 4 hours, bitcoin has rejected $11800 to $11900 once more. If Bitcoins can fall in the short term, it can print a lower high over a longer time duration.
Thus, the coming together of the Bitcoin consolidation, the upcoming expiration of bitcoin options and futures at the same time, and the twice resistance levels of bitcoin can be the primary three reasons that are responsible for the spike in bitcoin price volatility.