There were many predictions that Bitcoin would hit $100,000 this year. Although there are some weeks to go, these expectations do not appear to be true. Despite price collapses and huge liquidations that have rocked the digital asset, Bitcoin continues to be a bullish investment.
Analysts and the cryptocurrency market as a whole have been focused so much on the positive future of the asset that they are not paying attention to the lows for this year. It is crucial to look beyond the bullish predictions for the year 2021 and consider how cryptocurrency may be affected by the closing price of bitcoin.
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Justin Bennett, a crypto analyst addresses these issues in the latest edition of his weekly newsletter. Bennett discusses the future of the digital asset and the consequences for bitcoin’s closing below $50,000 in the current week.
Option Contracts are becoming worthless
Some bitcoin options contracts will expire this year. The profitability of these option contracts depends on how much BTC the day before expires. Bitcoin has had a difficult time maintaining its value over $50,000 since the crash. This has been bad news for options contracts. Bennett notes that a close below $50,000 would see all of these contracts expire worthless, playing into what he called the “max pain theory”.
The crypto analyst is not particularly confident in the digital asset’s ability to finish the year above $50,000. According to him, he believes that consolidation of larger-cap cryptocurrencies will continue into the final month.
Bennett notes however that the December 4th candle means there’s a large range of bitcoin. The future range for bitcoin is between $42,000 to $53,000, which gives the asset a huge margin of safety.
Source: BTCUSD tradingview.com| Source: BTCUSD on TradingView.com
Bitcoin Volume Is Concerning
Bennett also points out that there is not enough volume to support cryptocurrency. It is one thing to initiate a rally, or even a breakout. But it is quite another to have enough volume to support that breakout. A rally wouldn’t be worthwhile if it didn’t.
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“If we’re to see Bitcoin and the rest of the crypto market breakout later this month or even January, we need to see volume to match the price increase,” said Bennett. “Without volume, any rally or even breakout is more likely to fail.”
Bitcoin continues to strengthen following the $53,000 testing. The market just waits to see if more institutional money will be available to support the market. Bennett estimates that the current bitcoin key support is $49,000. “Below that is the April trend line near $46,000,” Bennett notes.
Featured Image from Bitcoin News. Chart from TradingView.com