Bitcoin’s price has been on a rollercoaster throughout the past few days but it appears that, at least for now, the bulls have the upper hand.
They were successful in reclaiming the important technical and psychological level of $60K and are currently attempting to push BTC above $61,000.
However, we are headed for the weekend, when the price action is typically rather different due to a number of factors, such as a lack of volume.
With this in mind, let’s look at the three things you need to look out for during the weekend that may have an impact on Bitcoin’s price performance.
Trading Volume and How It Impacts Volatility
Typically, more volatility is associated with more trading volume. However, it’s also worth noting that trading volume can be a reactionary metric—a function of volatility. In other words, traders react to market changes. If there’s a sudden movement in either direction, they open the respective batch of orders to protect or capitalize on the move, hence pumping more liquidity into the market.
Trading volume on weekends is traditionally lower than that on weekdays. This plays a role in another metric called market depth. The lower the volume and, thereby, the liquidity in the market, the easier it is to produce more meaningful price movements.
Just a few weeks ago, the BTC price dropped from above $62,000 to below $57,000 during the weekend. At the time of this writing, the 24-hour volume is around $25 billion, which is more or less in line with the average, but any changes in this metric in the upcoming couple of days may be a signal to pay attention.
Hidden Signs Spell Promise
Another interesting metric to consider when gauging the possibility of a future price movement is Bitcoin’s funding rates.
These are used to gauge whether buyers or sellers are executing their orders more aggressively. It’s important to clarify here that funding rates are used in the derivatives market. However, the latter is known to impact spot prices as well, making it an important consideration.
Just a few days ago, we reported that the funding rates had declined to almost zero following Bitcoin’s price drop below $60K. This suggested that there might be a bounce incoming and, surely enough, just a day later, the cryptocurrency soared above $61,000.
At the time of this writing, the funding rates on some exchanges have even turned negative on some crypto exchanges, marking the potential of a more volatile move in the coming days, especially given increased trading volumes.
Bitcoin’s Price and How It’s Impacted by Open Interest
Bitcoin’s open interest is another important metric that may play a role in the formation of larger moves during the weekend.
It’s another important metric used in the derivatives market. It’s essentially the sum of all open positions, regardless of whether they are long or short. Large or increasing open interest is typically a precursor to volatility.
Data shows that during the past 24 hours, there’s been an increase of about 1.7% in perpetual contracts OI and 0.2% in futures contracts.
Large open interest headed into the weekend, coupled with thinner trading volume and broader market liquidity, could mean that it would be easier to shift the market with less effort.
These are three things that are worth following in the next couple of days to avoid surprises and potentially capitalize on opportunities.
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