Bitcoin’s price volatility was the main focus in the past week as the crypto and equities markets reacted to newly released US economic data and a sudden increase in Treasury yields. This led to a sharp correction in the price of Bitcoin, as well as in the DOW and S&P 500.
Despite this, Bitcoin’s rally above $102,500 on January 6th gave technical traders hope that a potential dip below $90,000 had been avoided. However, rising Treasury yields and rumors of the US Department of Justice selling $6.5 billion worth of Bitcoin seized from Silk Road added to the bearish sentiment in the market.
Options trader Tony Stewart expressed his view on how intelligent traders would react to the news, stating that bears would push the narrative lower until momentum pushes back.
Crypto traders have a unique strategy for interpreting sentiment data and unconfirmed bearish events to their advantage. On January 9th, all traditional finance markets were closed due to the National day of mourning for former US President Jimmy Carter. This created an opportunity for traders to capitalize on smaller flows and potentially buy spot Bitcoin.
Bitcoin was already in a weak position, which further amplified the opportunity for traders to push prices lower while buying spot coins elsewhere. The DOJ news and surrounding media coverage added to the bearish narrative, providing an opportunity to reposition in derivatives markets and capture discounted spot Bitcoin before the anticipated rally after President-elect Trump’s inauguration on January 20th.
Cointelegraph spoke to Brian Russ, the chief investment officer of 1971 Capital, to gain insights on how he and his firm were analyzing the recent news and price action. Russ mentioned that it is difficult to define the exact path due to multiple factors at play. He also highlighted the dominance of derivatives in BTC daily flows and the challenges of manipulating a market with a $2 trillion market cap.
Regarding the impact of the market closure on January 6th, Russ explained that ETFs only represent a small portion of daily average volume and, therefore, did not significantly affect the markets. He also commented on the potential impact of the Silk Road Bitcoin sales, stating that the market likely priced in these sales and their impact would be muted.
Considering the potential for speculators to exploit light liquidity zones and bearish news headlines, Russ suggested that large speculators would opportunistically move prices around key stop and leverage levels, leading to increased volatility. He advised traders to set limits in anticipation of short-lived dips.
Traders generally agree that bearish crypto headlines tend to have a stronger impact on price movement than the actual events themselves. This is because markets tend to price in events once the initial shock of the news wears off.
This article does not provide investment advice or recommendations. Readers should conduct their own research before making any investment or trading decisions.