Bitcoin is seeing a wild start to the week with volatility taking traders up and down by thousands of dollars in under an hour.
In what will cause headaches if it sets the tone for the coming days, Bitcoin dropped by $4,000 in less than sixty minutes on Monday—what’s next?
Modern Consensus takes a look at what traders can expect in the second week of 2021 as professional investors come back to their desks and coronavirus continues to dictate bizarre market conditions. We also publish a weekly roundup piece every Friday, the latest edition of which may be found here.
$34,800 highs spark hair-raising day for hodlers
The weekend formed a source of entertainment for many a hodler, beginning with BTC/USD at $29,200 and ending with the pair at close to $34,000.
The impressive performance left many speechless, as observers waited to see how high Bitcoin could go before the inevitable pullback set in. In the event, the top came at $34,800 before a slow U-turn gathered pace on Monday morning.
There ensued a dramatic few hours in which Bitcoin bottomed out at $27,700 before rebounding back above $30,000. At press time, $31,000 is forming a focus, but volatility is ensuring that no fixed level stays for long.
“Get used to 5k dips as we go to $100k. Comes with the territory,” Blockstream CSO Samson Mow summarized to Twitter followers on Monday.
With volatility at a 10-month high, a look at exchange orderbook data underscores the fickle status quo on spot markets. Strong selling pressure has suddenly appeared at $34,500, while support levels are comparatively lacking above $26,500.
Longtime market figures, however, broadly agree with Mow that this kind of behavior is just another day at the office for Bitcoin in a bull market.
“Bitcoin just crashed to it’s all-time high from last week. Everyone relax,” Morgan Creek Digital co-founder Anthony Pompliano, also known as Pomp, added.
In his latest YouTube update on Monday, meanwhile, popular trader Michaël van de Poppe highlighted the area at $27,700 where Bitcoin bounced as more significant support. An analysis of Fibonacci levels meanwhile provides scope for price targets should bullish activity return, with $38,500 forming a reasonable ceiling.
Regarding the weekend’s trading environment, Van de Poppe highlighted a curious phenomenon on major exchange Binance as potentially fuelling extra volatility. The USD/EUR pair on the trading platform traded at a full eight cents higher than global spot markets for much of Saturday and Sunday.
“The $EUR / $USD pair is back to the original levels, which was probably the reason for the volatility in the weekend,” he tweeted on Monday.
“Probably the reason for the massive volatility during the weekend (Euro shortage). All good and that’s fine now.”
Binance has yet to comment on the issue, with CEO Changpeng “CZ” Zhao, popularly known as CZ, noting all-time high volumes were causing slight technical teething problems.
Big buyers keep sucking up supply
Another feature of the weekend focused on large buys on Coinbase Pro, the professional trader arm of U.S. exchange Coinbase, likely tied to an institutional buyer or similar whale investor.
With the holiday season over, those looking to adopt large BTC positions will likewise be returning to work.
In a timely note, Mow reminded the community of the number of institutional buy-ins that took place over the past few weeks. Such commitment, he suggested, was not made in order to cash out profits at $35,000.
“The giant investors are seeing Bitcoin as the new form of payment in the future, furthermore, in order to hedge the foreseeable inflation caused by the upcoming stimulus, Bitcoin has become their first choice,” exchange BTCC meanwhile wrote in a market forecast of its own on Monday.
“More conception and expectations have been added into the crypto market, the bulls will never get satisfied accepting more all the good news for Bitcoin.”
Beyond crypto markets, stocks are continuing from last week’s all-time highs—a curious contrast in light of the encroaching coronavirus lockdowns visible across the US and Europe.
Macro sentiment is tending towards viewing 2021 as a year of rebirth for stocks, but the situation on the ground could not point to a more different reality.
“We look for a rocky start to 2021 as many countries battle Covid outbreaks. However, a combination of fiscal stimulus and wide vaccine distribution should boost growth by mid-year,” Bank of America told Bloomberg as part of a survey of big finance.