Bitcoin Finally Wakes Up

Bitcoin finally breaks away from trading sideways. There was hope that a strong move would result from low volume in these times of uncertainty. As of time of writing, Bitcoin experienced a small pump to $10,922. This puts an end to the $10,800 resistance level we’ve seen in the past week. Now, bitcoin will continue to test further resistance levels and the big one to look out for is $11,000.

Bitcoin daily chart Source: TradingView

This chart shows us the situation bitcoin found itself in. It had to move somewhere but no one knew to which side. Now that we have a move we’llsee if buying pressure can keep bitcoin above $10.9k or if this was another classic case of a bull trap.

Before the move, we have seen investors place major bets on bitcoin’s breakthrough using CME’s futures contracts. According to Skew, the CME traded $48 million worth of options, the highest daily volume sine July.

CME bitcoin options volume Source: Skew

Traders took $14,000 and $16,000 strike prices and $18,000 and $20,000 strike prices for the December 2020 and March 2021 expiry contracts. Vishal Shah, founder of derivatives exchange Alpha5, says that this is a sign of “strategic gearing for the topside”.

Traders likely bought call options at $14,000 expiring in December and simultaneously sold December expiry calls at $16,000. Similarly, calls expiring in March 2021 were bought at $18,000 and sold at $20,000. Traders use bull call spreads when they expect the asset to chart a limited rally in the short-term.

This information tells us that traders predict a rally but think that it will only reach $16k until the end of December. They also believe that prices will remain below $20k until the end of the first quarter of 2021.

As mentioned, bitcoin broke out of the resistance level but needs to break $11k next in order to end the pullback from August’s high of $12,476. If bulls can keep a consistent level of at least $10.8k then the pullback can end and a climb towards new highs can begin.

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