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One More Crash Required Before Bitcoin Hits $20K: Analyst

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Bitcoin remains at risk of crashing below $10,000 even as its long-term fundamentals look incredibly bullish.

The benchmark cryptocurrency could fall into the $8,000-8,500 area, according to a trade setup presented by a TradingView-based analyst. It showed BTC/USD in a “breakout zone” above historically relevant trendline resistance, now approaching a sell-off area defined by the $12-000-14,000 range.

Bitcoin faces high selling pressure near $14K. Source: BTCUSD on TradingView.com

The $12,000-14,000 area comes with a historical significance as resistance. It, on more than eight occasions, has capped BTC/USD from extending its upside momentum. Bulls turn cautious around it, leading to a drop in new long positions. That, in turn, paves the way for bears to increase short entries.

The upper green bar in the chart above shows higher bearish sentiment around the area.

Bitcoin, therefore, could stretch its upside momentum up until $14,000. Nevertheless, its rally may follow a sharp correction to the downside. Should that happen, the TradingView.com analyst sees the price crashing towards the lower $8,000s.

And he offered more than one technical outlook to explain his bearish bias.

Bearish BAT Formation

The analyst referred to one of his recent outlooks on Bitcoin, reiterating the same bearish correction towards $8Ks but based on a different technical pattern: BAT.

It is a classic retracement and continuation structure that occurs when a trend tentatively reverses its direction and continues on its original course. With that said, BTC/USD could continue trading towards the $12-14K area but would remain at risk of correcting lower below $10,000.

bitcoin, btcusd, btcusdt, xbtusd, cryptocurrency

Bitcoin price outlook, as presented by Weslad. Source: BTCUSD on TradingView.com

“If you could recall my last analysis which proposed immediate test on 12k zone after discovering potential BAT formation on BTC. This view remains very valid and we can count on it and wait for a possible retracement after the BAT target is achieved.”

Bitcoin at $20K

The analyst further added that a pullback towards $8,000 would bring ideal opportunities for investors with a long-term market outlook.

His chart envisioned a sharp rebound towards $20,000 as Bitcoin hit $8,000.

The prediction fell in line with what other fundamental analysts say about the cryptocurrency: That it would grow higher in the coming quarters as more and more investors pick it as their safe-haven against the Federal Reserve’s dovish policies.

The US central bank has vowed to keep interest rates near zero until 2023. It has also committed to purchase unlimited corporate and US government bonds. The policy risks sending yields on the long-term Treasuries below zero, making it unattractive for investors to hold bonds altogether.

Meanwhile, continuous injection of US dollars into the economy robs the greenback of its appeal of a global safe-haven. The same narrative also intends to help push Bitcoin higher because of its underlying scarcity as an asset.



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Bitcoin

Bears aim for sub-$60K Bitcoin price ahead of Friday’s $1.1B options expiry

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Bitcoin (BTC) entirely recovered from its recent drop that saw the price fall to the $53,000 support level. This move back to $57,500 relieved bulls from the negative pressure of the May 7, 3,500 BTC options contract, which represents $200 million in open interest along with a $1.1 billion options expiry.

Today’s swift recovery could have been partially driven by the news that New Digital Investment Group (NYDIG) partnered with Fidelity National Information Services (FIS) to create a framework for U.S. banks to offer crypto trading services.

Patrick Sells, the bank solutions chief at NYDIG, told CNBC that several banks have already signed up for the program.

Moreover, a Mastercard survey found that 40% of the 15,500 interview participants intend to use crypto for payments over the next 12 months. Additionally, it reported that 77% of millennials are interested in learning more about cryptocurrency.

Whatever the reason behind Bitcoin’s recent price recovery, bulls are now in a much better position for the May 7 options expiry.

The equilibrium in the call-to-put ratio is misleading

May 7 aggregate BTC options open interest. Source: Bybt

Options contract buyers pay the premium upfront and thus face no forceful liquidation risk. On the other hand, the call (buy) option provides its buyer with upside price protection, and the put (sell) does the opposite.

This means traders aiming for neutral-to-bearish strategies will typically rely on put options. On the other hand, call options are more commonly used for bullish positions.

Analysts could easily dismiss Friday’s Bitcoin expiry as the put-to-call ratio is flat. This means the neutral-to-bullish and neutral-to-bearish options open interest is balanced. However, these options will expire in less than 38 hours, causing the $65,000 and higher calls to become worthless.

The put options, a right of selling Bitcoin at $48,000 on Friday, are also worthless today. To correctly interpret the potential impact of the May 7 expiry, analysts must exclude the strikes that are too far out from the current price.

Bulls have a $104 million advantage at $57,000

The call (buy) options up to $60,000 total 4,950 contracts ($285 million), and if the price of Bitcoin happens to reach $64,000 on May 7, another 1,620 contracts will boost the call options open interest by $93 million.

Alternatively, the neutral-to-bearish put options add up to 3,150 contracts down to the $54,000 strike. These currently present a $181 million open interest and would be increased by 2,800 contracts down to $50,000. This level would boost put options’ open interest by $161 million.

Although bulls have a $104 million advantage leading to Friday’s expiry, this number would be greatly reduced at any level below $60,000. As the chart indicates, most call options (1,680 contracts) have been placed at this level.

Therefore, bears have incentives to suppress the price below $60,000. At least until 8:00 AM UTC on May 7.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.