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A quant has explained how there is a correlation between recent trends in US stock market volumes and Bitcoin price.
TradFi depth oscillator has bottomed out and is now back again
As explained by an analyst in a CryptoQuant aftervolume depth in traditional financial markets has been low lately.
The “TradFi Volume” is a measure of the total number of transactions that buyers and sellers make in the US stock market.
There is a concept called “market depth” which is the ability of any market to take large orders without much impact on the price of the commodity.
In general, the more orders there are in a market, or simply, the higher the volume, the stronger the depth of the asset. However, it is important that these orders are evenly distributed throughout the market, otherwise the depth would not be that great.
using one oscillator, the cyclical trend in the depth of each asset can be noticed. Here’s a chart showing how the US stock market’s volume-depth oscillator has changed its values in recent months:
The value of the metric seems to have been turning around in recent days | Source: CryptoQuant
As you can see in the chart above, the quant has marked the relevant trend zones between the Bitcoin price and the TradFi volume depth oscillator.
It seems that when the indicator has moved from positive to negative values, the value of the crypto has seen bearish winds.
On the other hand, the metric crossing the zero line in the opposite direction has led to a bullish trend for the price of BTC.
Bitcoin has also seen local bottom formations around the points where the stock exchange volume depth oscillator itself has bottomed out.
About a week ago, the indicator reached very low values similar to those between February and March 2020. Since then, the stat has started to rise again.
The analyst believes that this recent trending could mean Bitcoin will soon see a reprieve and could bounce to levels between $21.5k and $24.5k.
At the moment of writing, The price of Bitcoin is floating around $19.2k, up 2% over the past seven days. The cryptocurrency has fallen 4% in value over the past month.
The chart below shows the trend in the price of the coin over the past five days.
Looks like the value of the crypto has been stuck in consolidation during the past few days | Source: BTCUSD on TradingView
Featured image from Traxer on Unsplash.com, charts from TradingView.com, CryptoQuant.com