Bitcoin declines for third consecutive day, on below average volume. Bitcoin (BTC) declined 1% on Tuesday, marking the second consecutive day of declines for the largest cryptocurrency by market capitalization. Ether’s (ETH) price fell 1.1%, reversing gains made overnight. The second-largest cryptocurrency by market capitalization fell below $1,900 after hovering over that increasingly important threshold for much of the past week.Read MoreCoinDesk
BTC continues a reversion to the mean, drops below $24,000.
Ether’s (ETH) price fell 1.1%, reversing gains made overnight. The second-largest cryptocurrency by market capitalization fell below $1,900 after hovering over that threshold for much of the past week.
ETH’s total market capitalization is now 50% of BTC’s, approaching levels last seen in January. Viewing ETH’s market cap by comparison to BTC’s indicates the potential for a “flippening” event, where ETH’s total market cap exceeds BTC’s.
According to a report from research firm FSInsight, ether could approach bitcoin’s market cap over the next 12 months. ETH reached 83.2% of BTC’s market cap in June 2017, its highest level to date.
Traditional markets were mixed, as the S&P 500 and Nasdaq Composite index sank 0.2% and 0.5%, respectively, while the Dow Jones Industrial Average rose 0.6%
Commodities were also mixed with crude oil down by 3.7%, while natural gas increased 7.7%. Gold, a traditional safe-haven asset, declined 0.37%
Major altcoin prices were largely down with SOL and AVAX declining 2.4% and 1.02%, respectively.
?Bitcoin (BTC): $23,960 -0.3%
?Ether (ETH): $1,883 -0.9%
?S&P 500 daily close: 4,305.20 +0.2%
?Gold: $1,791 per troy ounce +0.5%
?Ten-year Treasury yield daily close: 2.82% +0.03
Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.
BTC prices fall to 20-period moving average after breaching upper Bollinger Band
BTC’s current 20-day moving average price is about $23,600, which would imply at least an additional 1% of downside if prices were to behave as they have in the past.
Traders who make use of Bollinger Bands have also used the 20-period MA or below as an area to add to long positions, viewing that as a solid entry point. Traders who expect prices to extend beyond the upper range are prone to add to positions at the moving average itself. Those who believe the moving average represents a solid valuation are prone to add to positions if prices fell below it, because they believe that prices will eventually increase to the average.
BTC’s price reversion remains in an area of solid option buying activity.
Despite the decreasing price, there appears to be bullish sentiment around current price levels. Call open interest exceeds put open interest, resulting in a call/put ratio of 1.88. This is slightly higher than the call/put ratio of 1.85 observed on Aug. 10.
A call represents the right but not the obligation to purchase an asset at a specific price, while a put represents the right but not the obligation to sell an asset at a specified price. Open interest represents the number of active options contracts.
The ratio of calls to puts is an asset’s call/put ratio, and a ratio in excess of one indicates a greater number of calls than puts. The extent to which calls exceed implies bullish sentiment.
Options open interest by strike price shows a concentration of open interest at the $23,000, $24,000 and $25,000 strike prices. In the case of the $24,000 and $25,000 strike prices, the open interest for calls exceeds the open interest of puts.
BTC has broken below its trendline.
BTC has broken below the trendline that the Aug. 3 Market Wrap highlighted. Using the same chart as above, but removing the Bollinger Bands for visual clarity, shows that prices have broken below trend. BTC prices will need to increase about 3% on Tuesday or 6% on Wednesday to recapture their uptrend.
Overlaying (left axis) the volume profile visible range, or VPVR, on the same chart illustrates high levels of volume at the $23,800 price point, which coincides with the 20-period MA. The VPVR displays trading activity over a certain period of time across specified price levels.
Traders may be interested in the extent to which volume declines in the price points between $23,700 and $30,000.
Historically, these “low volume nodes” represent areas where prices are prone to move quickly. This factor, in conjunction with BTC’s proximity to its 20-period MA and the level of call options at the $24,000 and $24,000 strikes, could provide a boost to prices in the near future.
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