Academy Trading Ideas Article

PayPal Rumors Drive Bitcoin Price but Expiring Options Set to Increase Volatility: Technical Tuesday

2020.06.23 Cyrus Ip

In brief

  • Bitcoin (BTC) price has rebounded to the $9,600 area on rumors of PayPal integrating crypto
  • Market volatility is expected to increase ahead of major BTC options contracts expiring
  • Data shows BTC’s current valuation has more upside potential and room to grow

Market overview

Sentiment in the cryptocurrency markets improved early Tuesday morning in Asia (UTC 8 p.m. – 9 p.m.) as Bitcoin reclaimed the $9,600 – $9,800 levels initially before a short correction. The rebound came after reports highlighted Paypal’s job postings seeking crypto engineers, fueling rumors of a possible Bitcoin integration.

However, market volatility is expected to stay high this week despite the Paypal rumors because of June BTC options contracts nearing expiration. It’s worth noting that spot markets tend to be more volatile ahead of, and during major options expirations.

Meanwhile, data from Glassnode shows that BTC’s Market Value to Realized Value (MVRV) ratio has remained at relatively low levels despite the recent price surge.

Bitcoin MVRV
Bitcoin MVRV ratio (7d-MA); Source: Glassnode

The MVRV ratio indicates whether BTC has been trading above or below its fair value relative to its realized price. When the ratio is between 1 and 2, it means BTC could be undervalued, when the ratio is higher, it reflects overvaluation. With the current MVRV ratio of 1.6, Bitcoin’s upside potential remains large, even as market prices have been inching closer to $10,000.

Elsewhere, DigiByte (DGB), Ontology (ONT) and Bitcoin Diamond (BCD) were among the top gainers in the altcoin space, while Hycon (HYC) and Orbs Hybrid Blockchain (ORBS) gave up between 6% – 9% in the early Tuesday session.

Price Analysis

BTC/USDT – Not yet a trend reversal?

Momentum has turned positive for BTC/USDT as the pair found the lower supports in the triangle pattern intact. This upside momentum is also reflected in the RSI and the DMI. Although the MACD remained red, the difference between the two lines has been narrowing. However, the RSI has broken out of its recent trend, while the +DI has advanced above the -DI and the ADX. Both indicators hint towards a positive shift taking place. 

Despite this positive shift in sentiment, however, it’s hard to call Tuesday’s price actions the beginning of a trend reversal. That is because the pair is still trading within the triangle pattern, and a breakout is needed to confirm a definite reversal.

If the positive sentiment remains intact, the pair may retest the $9,800 to $10,000 area, which is still a significant resistance level.

The support at $9,200 could be the lower area to watch, which if tested, could increase the likelihood of revisiting the one-year resistance-turned-support trendline near $8,850.

BTC/USDT found support in the lower part of the triangle; Source: OKEx, Tradingview

ETH/USDT – Shooting Star in the making?

ETH/USDT is reflecting a momentum breakthrough similar to that of BTC/USDT; however, we haven’t seen enough buying power near Tuesday’s high of around $246. In this scenario, the pair may easily produce a daily “Shooting Star” pattern, which is typically a bearish candlestick with a long upper shadow.

The pair has also almost reached the upper Bollinger Band, which can be considered an early sign of being overbought, despite the RSI remaining below 70. Moreover, the trade volume didn’t increase significantly alongside with the price either, further strengthening the case for a short-term correction. The $227 to $251 range that we highlighted in our last publication remained valid, and that could still be the reference for this week.

ETH/USDT daily ‘Shooting Star’ in the making; Source: OKEx, Tradingview

XRP/USDT – A short-term rebound is due?

In our previous Technical Tuesday, we highlighted how XRP bears remained in control last week, and XRP/USDT has since touched the triangle’s lower support as expected.

Initial signs show that the bulls may start to come back soon, with the stochastic producing a bullish crossover and the RSI beginning to breakout. However, even if a short-term rebound materialized, the upper resistance of the triangle, near 0.198, remains valid. Again, a trend reversal can’t be confirmed at this point.

XRP/USDT could rebound from here; Source: OKEx, Tradingview

ONT/USDT – Getting overbought?

ONT/USDT has been one of the top-performing altcoins on the OKEx trading platform this Tuesday, gaining 5% during the session.

The pair has produced a breakout on the upside from the recent triangle pattern, and that upside momentum can also be seen on the MACD. However, as it trades higher, it is also getting closer to the 365-day moving average, which seems to be a strong resistance level.

$0.7 could be the first area to watch, following which we could see the pair reaching for $0.76. On the downside, $0.63 remains active.

ONT/USDT produced a daily breakout; Source: OKEx, Tradingview

Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary

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