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Breaking News: Coinbase Confirms DOJ Investigation Following Major Security Incident

Bitcoin Under Pressure Near $40K, Here Are 2 Reasons Why That Could Change Soon

Reynaldo Marquez
Reynaldo Marquez
1 year ago
3 mins read
Bitcoin

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Bitcoin remains rangebound in the high $30,000 to low $40,000 areas. The first crypto by market cap has seen its volatility reduce as several factors contribute to the slowdown across the sector.

Related Reading | TA: Bitcoin Trims Gains, Support Turned Resistance At $41K

At the time of writing, Bitcoin (BTC) trades at $40,500 with a 6% loss in the last 24-hours and a 1% profit over the past week.

Bitcoin BTC BTCUSD
BTC moving sideways on the 4-hour chart. Source: BTCUSD Tradingview

Trading firm QCP Capital believes Bitcoin has been trading in a larger range as it reclaimed the area around its current levels. The firm claims that there are 2 main reasons behind BTC’s recent price action.

In addition to the U.S. Federal Reserve (FED) hinting at an aggressive monetary policy, there are expectations of Bitcoin and Ethereum revisiting critical support at $30,000 and $2,500, respectively. These expectations were generated by former BitMEX CEO Arthur Hayes’s latest post, “The Q Trap”.

In the options markets, traders are preparing for a potential drop as QCP Capital records a “massive selling of May and June calls, causing BTC and ETH risk reversal”. These levels dropped from negative 6% to negative 10%.

Conversely, the demand for BTC and ETH puts has increased. In other words, traders seem to be hedging for the upcoming crash by buying put (sell) options. If the price crashes, they will be able to benefit.

Ethereum has seen the biggest uptick in demand for put calls. QCP Capital attributed it to the delay of “The Merge”. The event is set to combine Ethereum’s execution layer with its consensus layer and make ETH 2.0 fully operational.

Bitcoin Finds Bottom With Stablecoin Craze

Bitcoin’s recent price action characterized by low volatility could also be the result of the popularization of algorithmic stablecoins, QCP Capital believes. These digital assets have been in the crypto space for many years, but Terra’s UST managed to give them new life.

The demand for UST has increased as users want to leverage the 19% annual percentage yield (APY) offered by Anchor Protocol. Other projects have begun imitating this model creating what the trading firm called a “soft floor in the market”. QCP Capital added:

We mentioned in a previous post that the precedent set by Luna Foundation Guard (LFG) would spread and that has happened quickly with a wave of announcements from FRAX, NEAR and TRON (…). Similar to how LFG bought BTC and AVAX, these algo stables will build their treasuries in the major coins and provide material support in the market from their buying.

The short-term relief in the market could be translated into long-term pressure. The trading firm claims that these digital assets could become a systematic risk for the sector.

If the entities managing these stablecoins buy BTC or ETH to maintain the pegged of their assets, there is a chance that a de-pegged scenario could increase the selling pressure in the market. If the stablecoins are at risk of becoming volatile, the entities will sell their assets to try to keep the pegged.

In any case, QCP Capital and others wonder about the long-term sustainability of the algorithmic stablecoins. UST, Terra’s native stablecoins, has been battle-tested, but many wonder if it will be able to keep its users with the rising competition.

Related Reading | Why A “Boring” Bitcoin Could Be A Good Thing

In the meantime, as expectations of a May/June crash increase and algo stablecoins proliferate, Bitcoin seems poised to remain rangebound with short-term price action to the downside. According to Material Indicators, BTC’s price will seek to take the liquidity of around $37,000.

#FireCharts is showing ~$100M in #bitcoin bid liquidity between here and $37.5k range. Expecting it to get filled, but watching to see if #BTCUSDT liquidity moves to the active buy zone or the buy zone moves to the orders resting on the @binance order book.https://t.co/26BLOFwenL pic.twitter.com/NdAGc48yfY

— Material Indicators (@MI_Algos) April 22, 2022

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Reynaldo Marquez
Reynaldo Marquez

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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