Bitcoin has been moving in a sideways direction after it was hit by a bear attack that pushed it to its 2021 lowest point. The first crypto by market cap seems to be displaying short-term low volatility and could see further downside, according to market participants’ expectations.
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As of this writing, crypto market cap has the first cryptocurrency trade at $30,000. It also boasts a 1.5% profit for the 24-hours preceding.
An American Federal Reserve (FED), policy shift was responsible for Bitcoin’s crash. After years of liquidity and low interest rates, the financial institution began tightening its monetary policies.
Glassnode recently reported that Bitcoin will enter bear market territory by 2021, according to an on-chain research company. Expectations of higher FED interest rates saw an increase at that point.
The firm believes that May and July 2021 selloff was the “genesis” of the current bear market. The drop in Compound Annual Growth Rat (CAGR), for Bitcoin and Ethereum coincides.
This is a measure of returns. Since BTC’s inception, it has seen a steady decline. The recent dropped in BTC’s returns, the research firm said, is worse than when the cryptocurrency crashed from the mid-area around $50,000 to $42,000.
Glassnode claims that the drops in CAGR and returns correspond with BTC bear markets. In terms of returns, May-July 2021 behaved similarly and even recorded a steeper decline than today’s negative 30% drop in this metric.
Bitcoin will see some relief if history repeats itself. The potential rebound might not be the end of the downtrend.
Play On Future Bitcoin Downside Action
The market expects this outcome. Glassnode stated that there will be an increase in put (sale) options for Bitcoin over the next 2 to 3 months.
The strike prices are $25,000 and $20,000 respectively. According to research, call (buy) options have lower strike prices than the $20,000, $25,000 and $15,000 ranges. Most bullish traders are hoping for an increase of up to $40,000 in the same time period. Glassnode claimed:
The market seems to prefer hedging risks and/or speculation on future price movements, at least until the middle of next year.
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Long-term, options markets are bullish. Players are targeting strike prices of $70,000-$100,000.
