Bitcoin price struggled to regain its bullish momentum after a sharp drop earlier this month, when it fell to $49,000.
On Wednesday, the largest cryptocurrency by market cap reached a trading price of $58,700, but investors are still concerned about a possible new crash similar to the August 5 drop.
Bitcoin Price Poised for 60% Gain?
In this context, market expert Timothy Peterson has highlighted a compelling indicator that can provide insight into Bitcoin price trajectory during the next three months.
In a recent message on social mediaPeterson pointed to the surprising predictive power of high yield bonds (HYG) on Bitcoin’s price movements.
Peterson noted that when Bitcoin is undervalued relative to HYG, it tends to outperform over the following three months. Conversely, when Bitcoin is overvalued relative to high-yield bonds, it can signal impending price declines.
According to a report According to Cane Island Digital Research, the current indicator suggests a HYG/BTC ratio of 25%. This figure is linked to a potential “lognormal” 60% increase in Bitcoin’s price over the next three months. If the price remains around $60,000, this relationship could reach around $109,000 by November.
Warns of increasing volatility in the future
When analyzing the current Bitcoin price movement, market research firm CryptoQuant has identified an important factor in the current decline: to create a resistance level among short-term investors at their breakeven price.
According to CryptoQuant, after the 20% drop earlier in the month, short-term holders were left with an average loss of 17%. As the price recovered towards their average cost basis, many chose to sell near their breakeven points, reinforcing this resistance level and contributing to the current price stagnation.
In addition, speculation among traders about possible price increases has created a fragile trading environment. Since August 5 open interest Bitcoin futures rose from $13.5 billion to $17.9 billion, up 31%, while financing rates remained positive, indicating a premium over perpetual contracts.
The company warned that this scenario often leads to instability in traders’ positions, making the market more susceptible to sudden moves, as witnessed over the past 24 hours.
The pressure on long positions became apparent on Wednesday when Bitcoin went long liquidations reached $90 million, marking the highest level since August 5. The combination of these liquidations and the halting of traders resulted in a $2.2 billion drop in open positions, further underscoring the market’s volatility.
At the time of writing, the price of Bitcoin is trading at $58,900, down over 4% in the 24-hour time frame for the largest cryptocurrency.
Main image of DALL-E, chart from TradingView.com