The price of Bitcoin has experienced significant fluctuations over the last few days, but it seems that the bulls are currently in control.
They managed to regain the crucial technical and psychological threshold of $60,000 and are now working to drive the price of BTC above $61,000.
As we approach the weekend, price movements are generally different due to several factors, including lower trading volumes.
With that in mind, let’s examine three key elements to monitor this weekend that could influence Bitcoin’s price action.
Influence of Trading Volume on Volatility
Typically, increased trading volume results in greater volatility. However, it’s important to recognize that trading volume can also be reactive—responding to volatility. In simpler terms, traders may place orders in response to market fluctuations, adding liquidity to the market.
Weekend trading volumes are usually lower compared to weekdays, which affects a metric known as market depth. When trading volume and liquidity are low, significant price movements become easier to trigger.
Recently, Bitcoin’s price plummeted from over $62,000 to below $57,000 during a weekend. At the current moment, the 24-hour trading volume is approximately $25 billion, which aligns with typical averages, but any variations in this number over the next few days could signal important market activity.
Potential Indicators for Upcoming Price Movements
Another crucial metric to consider when anticipating future price changes is Bitcoin’s funding rates.
These rates help assess whether buyers or sellers are aggressively executing their trades. It’s essential to note that funding rates pertain to the derivatives market; however, they can also influence spot prices, making them a significant aspect to consider.
A few days back, we noted that the funding rates had nearly reached zero following Bitcoin’s decline below $60,000, indicating a potential for a rebound. Indeed, just a day later, the cryptocurrency surged past $61,000.
Currently, some exchanges are even showing negative funding rates, hinting at the possibility of increased volatility in the coming days, particularly with heightened trading volumes.
The Role of Open Interest in Bitcoin Pricing
Bitcoin’s open interest is another vital metric that may influence the likelihood of larger market movements over the weekend.
This metric reflects the total number of open positions in the derivatives market, regardless of whether they are long or short. Generally, a high or increasing open interest signals potential volatility.
Recent data indicates that there has been a 1.7% increase in perpetual contracts open interest and a 0.2% rise in futures contracts in the last 24 hours.
High open interest as the weekend approaches, along with lower trading volumes and minimal market liquidity, could mean that it’s easier to influence market prices with less effort.
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