Market wrap: Bitcoin rises after volatile week

Cryptocurrencies traded higher on Friday after a volatile week. Bitcoin was holding support above $ 33,000 at the time of publication and is roughly stable for the week. Technical charts suggest buyers will remain active above $ 30,000, although the bullish momentum begins to slow as the weekend approaches.

“The possibility of price action falling into the $ 20,000 range is very real, but traders looking to re-test previous all-time highs are likely to be disappointed,” wrote Sean Rooney, manager. of research at crypto asset manager Valkyrie Investments, in an email to CoinDesk.

“May’s price drop was dramatic, as the chain re-accumulation of bitcoin sold during this drop in longer-term holders occurred over the course of eight weeks of side price action,” wrote Rooney. “It is preparing well for a late summer rally before the fourth quarter.”

More than 5,000 bitcoin shorts were added to the Bitfinex exchange on Thursday. “When shorts close their positions, they do so by taking a long position to compensate for their short exposure”, tweeted Digital Delphi.

The recent build-up of shorts is still below June’s record highs, suggesting that pessimism may continue as bitcoin remains in a medium-term downtrend that began in April.

Eventually, extreme pessimism could lead to short pressure as buyers react to oversold conditions, fueling a price rally.

Ruffer Investments, a UK investment manager, made a profit of $ 1.1 billion on a bitcoin investment in five months. “So what has changed? The price, ”Duncan MacInnes, chief investment officer at Ruffer, wrote in a blog post on Friday.

“Last November, we gained exposure to bitcoin,” MacInnes wrote. “We saw it as an option on an emerging store of value with a very asymmetric and attractive risk / reward profile.”

However, retail speculation and spike in liquidity indicated foamy market conditions earlier this year, prompting Ruffer to sell off all of his bitcoin exposure in April.

In recent weeks, bitcoin’s correlation with the S&P 500 has started to increase, while the correlation with commodities continues to decline. This divergence could make bitcoin attractive to investors looking to diversify their exposure to stocks, commodities and cryptocurrencies.

Mike McGlone, a commodities strategist at Bloomberg Intelligence, expects bitcoin to outperform Brent crude this year.

“The relative discount in the price of bitcoin relative to the premium of crude oil may show that techniques and fundamentals are aligned to resume the ratio’s upward trajectory,” McGlone wrote in a report Thursday.

“Like similar conditions at the end of 2016, we see the bitcoin-to-gross ratio well positioned to resume its uptrend, especially if a new low in bitcoin’s relative volatility at the end of 2020 is any guide.”

Although bitcoin has fallen into a coma in a narrow range above $ 30,000, less than half of the all-time high reached just two months ago, some options traders are busier than ever, embracing relatively high risk strategies to take advantage of the continued consolidation of cryptocurrency prices.

One of those strategies is to implement “short chokes,” essentially a bet that the price of bitcoin won’t burst any time soon.

“Our favorite trade continues to be short BTC chokes in the $ 30,000 to $ 40,000 range,” Singapore-based QCP Capital said in a Telegram article on June 30. “With psychological resistance at $ 40,000 and strong support at $ 30,000, there is a good chance that BTC will trade in that $ 10,000 range in the near future, which would likely lead to a collapse in implied volatility. . ”

Short strangles involve the writing of out-of-the-money (OTM) calls and put options with the same expiration dates. OTM calls are those with a strike price above the current bitcoin level, while OTM puts have strike prices lower than the current bitcoin price.

The USDC, the second largest stable coin by market cap, has the potential to become “the most widely used iteration of the US dollar,” wrote Mati Greenspan, CEO and founder of Quantum Economics, in a note, after the currency’s backer, Circle, has announced plans to go public.

“At the moment, there is only one that is widely released that complies with all known US regulations, and that is the USD coin,” Greenspan wrote.

USDC is gaining more stock as the coin stablecoin industry grows rapidly. Meanwhile, some of the best decentralized finance (DeFi) sites are offering higher yields for staking the larger USDT stablecoin than USDT.

“Even though tether is more readily available and more liquid, the USD coin is simply viewed as a more stable investment vehicle,” Greenspan wrote.

Most of CoinDesk 20’s digital assets rose on Friday.

Notable Winners at 9:00 p.m. UTC (4:00 p.m. ET):