Bitcoin’s sideways action continues. Since 2022 began, the bitcoin price has been trading inside a tight range of roughly $2K. This is very untypical for Bitcoin and usually ends with a massive move in either direction.
Option Market Analysis
While the bitcoin market is showing weakness, the BTC options market has seen a sharp open interest decline after 2021‘s most significant options expiry.
The historical volatility level of bitcoin dropped sharply and is currently at 49.2%. It seems that for now, many heavy investors prefer to hold their trades and wait for the next price developments over the upcoming days. It is safe to say that uncertainty is evident among the options traders.
Technical Analysis: The Short Term
Looking at the 12-hour time frame chart of BTC, there is significant resistance, preventing any possible recovery unless broken. Moreover, the diminished demand in the spot market, at the moment, lowers the chance of a bullish breakout above the mentioned resistance.
Bitcoin’s price is now trading below a descending trend line and the Ichimoku Cloud, as shown below.
The $48.5-49K resistance range is a substantial obstacle for any bullish price action. To move higher in this time frame, bitcoin needs to break out the $49K resistance and close a candle above it.
Another major resistance zone is shown in the chart, which is the $51.5-52K area. Getting rejected by these two areas might end up in a further drop towards the $40-42K zone, which has acted as sophisticated support on December 4 (December’s lowest).
On the weekly time frame, bitcoin had lost the midline of the Bollinger band as dynamic support and pulled back since then.
However, it could not reclaim this line and dropped to $45.7K. In case bitcoin can’t break above the critical $53k resistance this week due to the Parabolic SAR, which indicates a downtrend on this time frame, bitcoin might reach down to the lower Bollinger band in the upcoming weeks. Possible supports are marked on the chart.
Order Book Analysis
The following order book analysis, which looks at the open BUY/SELL limit orders on different exchanges, has recently attracted much attention.
An interesting example, shown below, presents the BUY wall on Bitfinex’s at the $44-45K range. This range has been a solid resistance since mid-December.
These BUY/SELL walls must be monitored closely because the orders can be canceled at any moment. Moreover, we should be cautious about the order book analysis before utilizing it in our trading plan.