FxWirePro: Corrective mode or bubble burst? BTC/USD drifts in narrow range after sharp spikes – Stay hedged via bitcoin derivatives

Many sceptics and critics of bitcoin have come up with their dubious notions that it has created a bubble and likely to collapse.

On the contrary, many crypto aspirants and optimists have been perceiving the current trend of bitcoin prices as corrective mode as they reckon that price trend of any asset class wouldn’t always be in bullish nor in bearish mode constantly. There would be swings on either directions regardless of the major bull or bear trend, and these swings could be categorized as minor, major and intermediate swings.

Well, in this write-up, we highlight that the journey of BTCUSD from $735.3 to a whopping $19,891 levels, last year, (at BITFINEX exchange), or 2,605% surge was commendable. However, on the contrary, the Bitcoin bears have held steady from the last couple of months’ trading sessions.

On an intermediate trend perspective, the pair has tested the strong support several times in the recent past at 78.6% fibonacci levels from the peaks of last december’2017 (i.e. 5701 levels) but for now, failure swings are observed at 21EMAs, the major trend wedged between 5700 - 11700 levels.

From last couple of days, the low volumes were observed in Bitcoin trades that has been a cause of concern for the cryptocurrency avenue. Although BTC was expected to break out of major resistance levels at $6,800 and $7,000, low volumes prevented it from recording a major movement on the upside.

The HFs note to investors points out that in 2017, cryptocurrency markets and trading platforms have come up with better liquidity and stability, as additional products have been added in an attempt to tame the volatility of Bitcoin.

Volatility is the heart and soul of option trading. With the proper understanding of volatility and how it affects your options you can profit in any market condition. The markets and individual asset class are always adjusting from periods of low volatility to high volatility, so we need to understand how to time our option strategies.

How to hedge this turbulence: For now, to evaluate the future prices for this unconventional currency BTCUSD. Pricing BTC vanilla options are available at ORE which are not straight forwards as the underlying instrument (BTCUSD) is a new and a heavily volatile asset class. But, ORE seems to be exploiting with advanced mathematical models and techniques in order to attempt and infer future price behavior of BTC.

While capitalizing on such Bitcoin vanilla options, BTC option traders can get a clarity about bitcoin future prices and volatility to certain extent.

From January to till date has been the eventful months for bitcoin bears, with bears who are eager to short and gain despite the falling market being able to access bitcoin directly through futures made available through CME and CBOE.

However, newly invented blockchain as the technology has attracted investor interest in funds and cryptocurrencies have surged in recent months as these innovations continue to move towards the mainstream and generate compelling opportunities for investors, portfolio managers, traders and other market participants.

On hedging grounds, one can initiate shorts in 1m CME futures with a view to arresting further potential dips.

Currency Strength Index: FxWirePro's hourly BTC spot index is showing -89 (which is bearish), USD spot index is flashing at 39 (which is bullish), while articulating at (07:36 GMT). For more details on the index, please refer below weblink:

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