When to buy Bitcoin
Hide your crystal balls and Elliott waves, as Circus Du Soleil's inventory won't be needed today.
In the run-up to the Fed meeting, investors' eyes are twitching and their hand is reaching out to make a few stray trades. To avoid dire consequences, let's think through a plan of action both in the moment and on the mid-term run.
The short-term dynamics of assets in the moment are mostly determined by the derivatives market. The volatility term structure shows that since the date of the upcoming Fed meeting, the derivatives market has been laying down an impulse increase in volatility.
At the same time, in the last two weeks there is a significant increase in volumes and open interest in short-term options with expiry date of February 3, and Bitcoin volatility is decreasing. All this suggests that investors have been trying to front-load the Fed lately so as not to miss a potential rally, but their expectations are already built into current prices.
Typically, such situations follow the old stock market rule - buy the rumor, sell the fact. And sell the fact causes not only a selloff of the asset itself and a change in the bullish consensus, but also the closing of longs of option market makers, which were opened as a delta hedge to the calls sold to the market (many calls in the money go on expiration on February 3 and since the beginning of this week it is already profitable to cover them).
Therefore the price has all chances to continue the correction and test the nearest support (marking of liquidity zones on the chart). And the fact of a strong limit offer of January 29 only strengthens this probability. Very tasty conjuncture for trading, but in this case it is necessary to go on small timeframe and trade impulse imbalances in the moment.
And if you're a hodler and volatility, options and volume auctions are foreign to you, let's take the magnifying glass away from Bitcoin's technical stuffing and assess the medium-term prospects, which in most cases are determined by macrostatistics and intermarket factors.
The market started the year in an environment of maximum pessimism, but as positive macro data is released, the U.S. economy is getting closer to a soft landing (which is very desirable in the current election year). Meanwhile, the intermarket ratios and market breadth indicators are dotted with bullish markers. We see that fund flow into risky assets intensified in January, and hedging shorts are popping.
All this suggests that the upward medium-term trend is likely to continue, and short-term drawdowns are a good opportunity to add Bitcoin exposure to your portfolio.
Let's draw a line:
- Market rallied ahead of Fed meeting and may correct locally
- Volatility is expected to rise before the February 3 derivatives expiration
- The medium term picture remains bullish
- Local drawdowns are profitable for buying Bitcoin