The Crypto Market Has Moved Sideways Over the Past Week

During the first trading week of August, the cryptocurrency markets were shaken by a strange rumor involving the world's most active and powerful oil producer. Traders were puzzled by the prospect of Saudi Aramco getting into the Bitcoin mining business; there was no reasonable precedent for this assumption, but this false rumor somehow grew legs and managed to stop a bullish rally that looked as if it would have surpassed the $42,000 level.

The market has been moving sideways, and we have seen no increase in the rate of Bitcoin trading activity. However, it's important to keep in mind that not a lot of market volume can be attributed to trading activity versus trading "through," with most trading in an asset not directly connected to the price per unit of volume. Traders are holding their positions longer than before, waiting for the market to provide more clarity. The "Saudi Aramco Bitcoin Mining Stock Shocker" rumor was an example of an "event" that was entirely unrelated to the price of Bitcoin, but its effect was to disrupt the price movement, as evidenced by the $2,000 plunge in the one-week period after the rumor surfaced. This effect is known as "volatility contagion."

When we look at the price of Bitcoin over the past couple of days, Bitcoin's price volatility in the past week has almost doubled compared to the past two weeks. One thing that is becoming clear is that so-called Bitcoin whales, many of whom are hedge fund managers, are getting used to the elastic volatility. Technical indicators show that major traders are happy with the idea of taking out margin positions every time Bitcoin goes through a pullback period.

In the past week, many Bitcoin whales have moved into short-term trading positions to take advantage of the fact that the market had become extremely volatile in the past couple of days, before Bitcoin's price made a significant pullback. For Bitcoin, a pullback may be considered a bearish momentum reversal. It's too early to say how the pullback may affect Bitcoin long-term. What we are seeing now is how some Bitcoin whales will continue to accumulate Bitcoin through large, leveraged trading positions, with the intent of selling later on.