This morning, the Bitcoin price is back trading below the elusive $50,000 mark as the red-hot BTC/USD rally cools ahead of options expiry. BTC has pulled back to $47,850, losing around 6% from Monday’s high. However, the price is running into a strong area of support. Furthermore, Friday’s $2 billion option expiry will likely give BTC/USD a lift coming into the end of the week.
Bitcoin (BTC/USD) has been on a hell of a run recently. Following July’s dip below $30,000, the world’s largest cryptocurrency gained more than 70% in a month, reaching a high of $50,500 earlier this week. And just as there was a growing consensus a month ago that BTC/USD could fall to $20,000, mentions of new all-time highs have increased in the last few weeks.
In fairness, newsflow and improving fundamentals have been supportive of the price. The hash rate has staged a strong recovery in the last 3 days and has increased by more than 50% following China’s crackdown on BTC miners. Furthermore, institutional adoption remains on track and payments giant Visa continues to warm to cryptocurrencies and is now partnered with 54 crypto firms.
Another nod to robust institutional interest came when crypto-derivatives exchange FTX completed a $900 million capital raise, valuing the firm at a whopping $18 billion. Furthermore, yesterday Microstrategy Inc (NASDAQ: MSTR) revealed it had bought an additional 3,907 BTC. This brings Michael Saylors’s company’s total holdings to almost 109,000 coins at an average Bitcoin price of $26,769.
On Friday, options position worth more than $2 billion will expire. The largest concentration of open interest (OI) sits at the $50,000 strike price. This could lead to choppy trading conditions, with the Bitcoin price swinging either side of the strike for the next three days. Typically, the price is drawn to the strike price with the largest OI as both sides of the trade hedge their exposure. This should provide a bid to BTC/USD if the price turns higher towards $50k. However, until the options expire, the psychological resistance level should provide a ceiling for the price.
Looking at the 4-hour chart, it’s clear to see the Bitcoin price has been trading within a rising trend channel. The lower end of the band is seen at $46,700 and offers strong support. Furthermore, the Relative Strength Index reading of 42.0 is heading towards oversold conditions. And should the price trade to trend support, the RSI reading will decrease, providing an additional bullish signal.
I expect the trend to remain firm, and on that basis, I would expect a dip to $47,000 to encounter buying, which may lift BTC/USD towards $50,000. However, if the Bitcoin price loses trend support, it could extend lower. Therefore, a move below $46,700 would invalidate the bullish thesis.
For more market insights, follow Elliott on Twitter.