Disclaimer: The information presented does not constitute financial, investment, trading or other advice and reflects the opinion of the author only.
Bitcoin for almost the last month has been consolidating in a very limited range, roughly between $28,000 and $31,000. The tragic downfall that followed the Terra UST disintegration fiasco affected every coin in the market, including the flagship cryptocurrency. And, it seems, he is ready to continue.
Why, you may ask
On the technical side, Bitcoin price recently attempted to break out of this three-week consolidation region. But unfortunately it was immediately rejected and it fell back into lineup. This very clearly shows the lack of upside strength for BTC.
Moreover, volumes were poor and even the RSI progressed rather slowly.
In addition, data on liquidations of Coinglass.com also represented a worrying sign. The nearly 8% correction on June 1 after the range breakout was rejected was followed by a huge long Bitcoin sell-off.
Nearly $336 million in Bitcoin long positions have been liquidated. And it was the biggest liquidation day in the last three months
However, all is not catastrophic. The 14-day average of Bitcoin’s Put/Call ratio stood at 0.68, at press time. This suggested pullback to the upside could technically be possible due to the near-oversold situation. Or, if nothing else, at least a further drop from current levels shouldn’t be too severe. Thus, it brings a good value proposition with a good risk-reward scenario.
Along with this, data from Glassnode also suggested a 14-day average of perpetual futures funding rates on most major crypto exchanges offering derivatives in the positive zone. Thus, implying that these derivatives traders are paying to hold their long positions. This, in effect, confirms the above hypothesis of a good value proposition.
And, Bitcoin’s perpetual futures open interest stood at around $8.7 billion, at the time of writing – which has been steadily increasing since May 22, 2022. However, a word to the wise – the interpretation of forward open interest can go both ways and you have to be prepared for it.
Therefore, it looks like Bitcoin may have some tailwinds thanks to its favorable oversold situation. However, one can also agree that the upside is unlikely to happen any time soon. In all likelihood, a continued consolidation phase could occur before any major action occurs.
Therefore, as mentioned in one of our previous articles, an options trading strategy that takes advantage of a range constrained market – deploying short chokes or iron butterflies would be the best way to go from the front.
But it would be good advice to do your own research before trying something like this. Options trading requires reasonable experience and understanding; getting started without proper knowledge can be financially fatal.