The flagship cryptocurrency, Bitcoin, is quickly approaching $31,000 after gaining over the weekend. By analyzing this price action, crypto analyst Ali Martinez has predicted Bitcoin’s future trajectory as he suggests the bears could regain dominance soon enough.
A price correction is looming for Bitcoin
In a after shared on his X platform (formerly Twitter), Martinez noticed the potential head and shoulders pattern that formed on the daily Bitcoin chart after the uptrend. This chart pattern has always been considered bearish because it suggests that a trend reversal may be in store, meaning a price drop could occur soon enough.
Source: X
Martinez confirmed this assumption, stating that the daily chart (which he shared alongside the post) “points to a possible sell signal that will appear tomorrow. [October 23].” According to him, this prediction is supported by the TD Sequential indicator, which flashes ‘a green 9 candlestick’. The TD Sequential indicator helps traders identify the exact time of a possible reversal.
Martinez also alluded to the Relative Strength Index (RSI), which he said has reached 74.21. He noted that this is “a level that has led to sharp corrections since March.” An RSI above 70 also suggests that Bitcoin may be overbought and a price correction is imminent. This impending price correction can only be averted if Bitcoin manages to clock “a daily candlestick close above $31,560.”
At the time of writing, Bitcoin is trading around $30,700, up over 2% in the last twenty-four hours and another 10% in the last seven days.
The options market could be contributing to Bitcoin’s upward momentum
In a after on his
Source: X
He noted that the options market Bitcoin creators have an “increasingly shorter range as the spot price of BTC rises.” This current positioning could help “amplify the explosiveness of any near-term upward move” as these short gammas need to buy more Bitcoin to remain “delta neutral” as the price of Bitcoin continues to rise.
Based on his analysis, Thorn simply explained that the options market makers will have to place ‘buy orders’ to hedge against their short positions while the price of Bitcoin continues to rise and therefore increases purchasing pressurewhich could push the price of the crypto higher.
In the meantime, he believes that the long gammas could provide a safety net for Bitcoin’s price in the event of a price reversal. These long ranges would have to buy back spots to remain delta neutral, thus providing support and helping to prevent further decline (at least in the short term).
BTC bulls running out of steam | Source: BTCUSD On Tradingview.com
Featured image of Crypto Buyers Club UK, chart from Tradingview.com