Options data shows Bitcoin's short-term uptrend is at risk if BTC falls below $23K

Bitcoin's future performance depends on federal policies. Experts predict an uptrend in higher timeframes

By Shashank Bhardwaj

Image: Shutterstock

On August 15, Bitcoin (BTC) briefly surpassed $25,000 for the first time in months. However, the excitement lasted less than an hour. It was quickly followed by a 5 percent retracement over the next five hours. The bulls' strength is clearly waning on the daily bar chart. The level of resistance was higher than expected. It may, however, have given bulls false hope for the upcoming $335 million weekly options expiry. The bulls will soon need to show renewed tenacity in order to sustain the price rise that has been in place for the past two months.

Bitcoin fell by more than 2 percent on Wednesday, August 17. It dumped and tested the $23,300 support. This downtrend pushed the most popular cryptocurrency below a positive trendline formed by the lows on July 15 and July 26. The negative move occurred just minutes from the July meeting of the Federal Open Markets Committee (FOMC). The meetings indicated that policymakers discussed the necessity of continuing to raise interest rates. The move is expected to take place in order to keep borrowing costs at levels that limit economic growth in the United States for a long enough period of time to keep inflation at bay.

The negative news flow increased on August 16. On that day, the Central District of California federal court entered an order Monday to authorise the United States Internal Revenue Service (IRS) to serve a John Doe summons on SFOX. It is a cryptocurrency prime dealer based in Los Angeles. The order empowered the US Internal Revenue Service (IRS) to compel SFOX to reveal the transactions and identities of US taxpayers. Between 2018 and 2021, the IRS used John Doe summonses to obtain information from Circle, Coinbase, and Kraken.

This movement explains why betting on Bitcoin prices exceeding $25,000 on August 19 appeared to be a sure thing a few days ago. This would have encouraged bullish bets. Currently, BTC has already fallen below the $23,000 mark. Only $1 million worth of call (buy) options will be available if it remains below $23,000 at 8:00 a.m. UTC on August 19. The open interest for the options expiry on August 19 is $335 million. However, due to the reason that bears were overly optimistic, the actual figure will be lower. As their bets for August's options expiry extend down to $15,000, these traders may have been duped by the brief drop of BTC to $22,700 on August 10.

In this scenario, BTC must gain momentum in order to restore market confidence. The price of Bitcoin is vulnerable to changes in federal policy. Crypto trading analyst, Michaël van de Poppe, believes that Bitcoin’s ‘trend remains upward on higher timeframes.’ According to Poppe,

"Crucial to break $23.7K back. If a move to $24K occurs, a flip of $23.7K is trigger for longs. The trend remains upwards on higher timeframes. Still expecting $28-30K in the next weeks."

Shashank is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash

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