Bitcoin price in the first months of 2021 has encountered major spikes, and the whole world has been keeping an eye on it. According to analysts, there are many reasons for what’s happening, but the biggest one is certainly the increasing number of companies investing in BTC, like Tesla Inc.
Here are four impactful factors that might explain how bitcoin’s position will play out in the near future:
Trading Volumes’ Depletion
Despite continuous rises in bitcoin’s value, there has been a serious decrease in trading volume. This has started since January 4th’s price peak, at $42,000. There is clearly a difference in volume and price.
Why?
This phenomenon is called “volume divergence”. This means that there is not much capital entering the market, and demand is shrinking.
This situation may also indicate that bulls, investors who buy and sell swiftly in the hopes that there will be significant value rises in the near future, are turning into holders, waiting on fitter circumstances before buying. This behavior makes for market consistency.
Relative Strength Index (RSI)
Except for volume divergence, there is also the RSI divergence.
What is RSI?
According to Investopedia, the Relative Strength Index (RSI) describes a momentum indicator that measures the magnitude of recent price changes in order to evaluate overbought or oversold conditions in the price of a stock or other asset. Its reading can range from 0 to 100.
According to experts, oversold reading on the RSI (uptrend) is likely much higher than 30%, and an overbought reading on the RSI (downtrend) is much lower than 70%.
Currently, the indicator line reads 73, implying the asset is overbought.
The CME Gap
The CME is an electronic order-driven market and the world’s largest financial derivatives exchange. This market closes on weekends and during national U.S holidays. But the crypto market doesn’t.
When the price of Bitcoin moves either up or down after the CME closes, it creates a gap, because prices are fluctuating, but the CME market keeps fixed values when it is closed.
Statistically, CME gaps fill again almost every time, returning to their original numbers. Oddly enough, there are currently three gaps that have not been closed since last Christmas, December 25th, 2020, implying that there may be a drop.
Bitcoin Seasonality
According to statistics recorded since 2017, March is the worst performing month when it comes to bitcoin, being followed by September, the second-worst. The percentage of March losses reaches, on average, almost 15%. These numbers may be a sign that the following month will have its challenges, despite bitcoin’s recent jump.
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