Cryptocurrency analysis company Blofin Academy has released its latest report on the expected performance of Bitcoin (BTC) next week. The report highlights several important factors that can affect BTC's price movements.
The report begins by noting that bond yields rose rapidly after the market opened on July 1. This was due to a combination of the Fed using Overnight Reverse Repurchase Agreements to take some liquidity out of the market and the sale of treasury bonds pushing up yields.
In addition, the sharp decline in the yen/dollar exchange rate led the Bank of Japan to offset Japanese government bond yields by selling US treasury bonds and buying Japanese government bonds.
As these factors pushed up U.S. Treasury yields, investors' preference for risk-free assets also increased, according to the analytics firm. This trend is also reflected in the broader macro asset allocation. The prices of safe haven or risk-free assets such as gold, silver and DXY rose collectively. The demand for gold from central banks around the world is also increasing and keeps gold prices at high levels due to demand. In contrast, price movements of risk assets are now more influenced by hedging behavior.
According to the analysis firm, the level of liquidity in the crypto market is expected to remain low for the foreseeable period. As more macro events approach, the butterfly index has moved up slightly, but investors remain relatively optimistic about possible systemic risk in the market.
The butterfly index measures the relative abundance of out-of-the-money (OTM) high-strike call options and low-strike put options by comparing out-of-the-money (ATM) volatility with crypto exchange Deribit's bitcoin volatility index (DVOL).
A rise in the index indicates relatively stronger demand for OTM options (wings), or call options with a strike price higher than the current price of BTC, and put options with a strike price lower than the market price of BTC. In other words, it indicates that investors fear the risk of uncertainty or are sensitive to uncertainty.
However, according to the analysis company, the influence of market makers on price stability is weakening. For BTC, the gamma peak around $63,000 poses solid upside resistance. Conversely, there is significant negative gamma on the downside with a lack of support levels. The possibility of downside risk remains high if some “unexpected” thing happens.
*This is not investment advice.