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Bitcoin Rebounds Off of Key Support Level as Analysts Eye Upside

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  • Bitcoin saw a sharp overnight decline that came about following a period of immense strength
  • This sent the token reeling down to the $18,000 level, which has long been strong support for the cryptocurrency
  • Where it trends next will depend largely on whether or not it can continue holding above the support it has found at this key price level
  • One trader is pointing to just how aggressively this dip was bought, which indicates that it may be positioned to see significantly further near-term upside
  • Where it trends in the days and weeks ahead will depend largely on its upcoming weekly candle close

Bitcoin has been flashing some signs of immense strength throughout the past few days and weeks, with buyers trying to take control of its price action as bears show their first signs of vitality seen in weeks.

The coming few days should provide some serious insights into where the entire market will trend next.

One trader is now noting that the cryptocurrency’s reaction to this selloff indicates that a long-term price floor is being created.

He believes that this will allow it to rebound and continue its ascent, with the first wave of overzealous buyers getting “wrecked.”

Bitcoin Sees First Major Selloff Since Reaching $19,000

Throughout the course of Bitcoin’s multi-month uptrend, the cryptocurrency has been showing some immense signs of strength, only witnessing a few fleeting selloffs that were followed by upside.

This latest dip doesn’t appear to be an exception to this trend, as BTC’s price reeled as low as $17,650 before facing a “V-shaped” recovery that led to it seeing significantly further upside.

It is now in the process of clawing back the gains that were lost due to this dip, and it may be positioned to see further upside in the near-term.

Analyst Claims BTC has Made a New Price Floor

One trader explained in a recent tweet that the cryptocurrency’s reaction to this recent selloff indicates that a new price floor has been established, which may allow it to climb significantly higher.

He is now watching for a move higher, noting that the aggressive buying pressure throughout this latest upswing was promising.

“What you want to pay attention to now is how aggressively this dip is bought. I think the floor gets established passively. First overzealous buyers get wrecked. Here is a sign of that.”

How Bitcoin trends tonight should provide insight into where Bitcoin will move throughout the week ahead, as its weekly candle close is just a handful of hours away.

Featured image from Unsplash.
Price action from TradingView.





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Largest Latin American eCommerce platform adds $7.8M Bitcoin to its treasury

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Mercado Libre, the largest e-commerce platform in Latin America, has announced to the U.S. Securities and Exchange Commission (SEC) that it acquired $7.8 million in Bitcoin in the first quarter of 2021. It stated in the report:

“As part of our treasury strategy this quarter we purchased $7.8 million in Bitcoin, a digital asset that we are disclosing within our indefinite-lived intangible assets”.

The purchase makes the Argentinean company the first large Latin American company to acquire Bitcoin for its treasury and sees it join an exclusive club of companies such as MicroStrategy and Tesla, which have previously announced to the authorities the holding of BTC within their assets.

Just last week major Japanese game developer Nexon announced it had purchased 1,717 BTC for it’s balance sheet at a cost of roughly $100 million. Mercado Libre’s announcement makes it the 36th publicly listed company to hold Bitcoin according to Bitcoin Treasuries. Mercado Libre trades on Nasdaq as MELI.

Mercado Libre’s bet on Bitcoin

Beyond the formal announcement, the relationship of the popular eCommerce portal with Bitcoin is not new. As previously reported by Cointelegraph en Español, at the end of April it enabled the use of Bitcoin for their real estate verticals in the Argentine market.

In addition, Marcos Galperín, founder and former CEO of Mercado Libre, has already announced publicly on several occasions that he has owned Bitcoin in his personal portfolio since 2013, and has also expressed a variety of bullish opinions regarding the cryptocurrency ecosystem in Latin America, even stating that he saw Bitcoin as a better store of value than gold.



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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.