Why Closing Out The Year Below $50,000 Could Be Bad For Bitcoin
A lot of predictions had put the price of bitcoin at $100,000 by the end of the year and although there are still some weeks left to go, it does not look like these predictions will come to pass. Bitcoin has however maintained a bullish trend despite price crashes and massive liquidations rocking the digital asset in recent times.
Since analysts, and the crypto market in general, has been so focused on the bullish future of the asset, there has not been much attention paid to a low for the year. As the end of 2021 rolls around, it is important to not only look at the bullish end-of-year predictions but also how the cryptocurrency might be affected depending on the price bitcoin closes at.
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Crypto analyst Justin Bennett addresses this in his latest issue of the weekly newsletter. Bennett maps out the outlook for the digital asset, as well as the implications of bitcoin closing out the year below $50,000.
Options Contracts Becoming Worthless
Some of the bitcoin options contracts are set to expire at the end of the year and the profitability of these options contracts depend greatly on what price BTC is when they expire. Since the crash, bitcoin has struggled to maintain its value above $50,000 and this has not been good for the options contracts. Bennett notes that a close below $50,000 would see all of these contracts expire worthless, playing into what he called the “max pain theory”.
The crypto analyst is not particularly confident in the digital asset’s ability to finish the year above $50,000. He expressed that he expects the consolidation in larger cap cryptocurrencies to continue through the last month of the year.
Bennett however notes that there is a wide range for bitcoin due to the December 4th candle. This means that anywhere between $42,000 and $53,000 is possible going forward, providing a massive margin for the digital asset.
Bitcoin Volume Is Concerning
Bennett also points to the lack of volume in the cryptocurrency. One thing is to start a rally or a breakout, but the other thing is to get enough volume to match that breakout. Otherwise, a rally would not be successful.
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“If we’re to see Bitcoin and the rest of the crypto market breakout later this month or even January, we need to see volume to match the price increase,” said Bennett. “Without volume, any rally or even breakout is more likely to fail.”
As bitcoin continues to consolidate following a $53,000 test, the market is quietly waiting for more institutional money to pump into the market. Currently, Bennett has put the bitcoin key support at $49,000. “Below that is the April trend line near $46,000,” Bennett notes.