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Bitcoin Breaks $11.8K on Jerome Powell Speech; Is Rally Sustainable?

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A Jerome Powell speech on central bank digital currencies (CBDC) was enough to decouple Bitcoin from traditional asset markets.

The benchmark cryptocurrency surged above $11,800 in the hours leading up to the Federal Reserve chairman’s cautious remarks on CBDCs at a panel organized by the International Monetary Fund. At 0900 ET Monday, BTC/USD underwent a speculative jump from $11,523 to $11,650. One hour later, when Mr. Powell started his speech, the pair rested.

The next hour, however, it resumed its short-term uptrend by adding another $150 to it. Around noon ET, Bitcoin had established an intraday high at $11,833.

Bitcoin rallied ahead and around Mr. Powell’s speech on Monday. Source: BTCUSD on TradingView.com

It was a standalone act. None of the indexes that formed a positive correlation with Bitcoin matches its ascent in early Monday hours. The S&P 500, for instance, jumped 0.90 percent after the New York opening bell but later pared all those gains to close 1.63 percent lower.

Bitcoin’s daily candle, on the other hand, logged a 2.14 percent intraday return.

Xi Jinping Vibes

The uptick in BTC/USD on Monday served as a reminiscent of a short-term upward trend in October 2019. Only that time, traders raised their bids for the pair after Xi Jinping, China’s premier, endorsed blockchain – Bitcoin’s underlying technology – in a public event.

bitcoin, btcusd, btcusdt, xbtusd

Bitcoin jumped by more than $3,000 after Mr. Jinping’s pro-blockchain statements. Source: BTCUSD on TradingView.com

BTC/USD climbed by more than 40 percent – from $7,430 to as much as $10,540 – before succumbing to a strong selling wave that followed later. The pair crashed by more than 39 percent when the China hype faded.

An imminent correction was a word of caution among many traders as they addressed the Bitcoin rally’s size and pace. A pseudonymous one said that he’d be cautiously waiting for the crypto to hold above $11,660 before opening any new bullish positions.

“If I lose [the support], [then] I’ll be looking to short down to 11.2k,” he added.

Ivan Liljeqvist, a Sweden-based market analyst, ran a poll to understand the consensus behind the next Bitcoin move. The results came mixed, with 47.7 percent voting in favor of correction towards $11,000.

What’s Next for Bitcoin

In the short-term, Bitcoin expects to retain its positive correlation with the US stock market. The cryptocurrency’s direct relationship with the S&P 500 has been erratic, as shown in the Skew chart below. It rises and falls consecutively, but remain intact on a medium-term outlook.

bitcoin, btcusd, btcusdt, xbtusd

Bitcoin-S&P 500 correlation expects to bounce back. Source: Skew

The reason is that every market is waiting for the second coronavirus stimulus package. Once the negotiations settle – macro analysts expect a deal by the November 3 presidential election – all the riskier assets would likely surge in tandem.

Bitcoin also anticipates reaching a new yearly high as the stimulus reduces the bids for the US dollar – and even as it gives the Fed adequate tools to continue its near-zero lending rate and its infinite bond-buying program.





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Bitcoin

Bitcoin faces this final resistance zone before $20K all-time high

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Bitcoin (BTC) traders are pinpointing the order books of major exchanges that show the $19,500 level is a near-term resistance level.

Bitcoin rejects $19,500 for now

On Nov. 25, Bitcoin price was rejected at $19,500 with a relatively large volume across top spot exchanges. On Binance, for example, BTC price hit $19,484 before seeing a slight pullback to sub-$19,300.

BTC/USDT 4-hour chart (Binance). Source: TradingView.com

The minor rejection likely occurred because of the stacks of sell orders between $19,450 to $19,550.

A popular pseudonymous trader known as “Byzantine General” shared the order books of all major exchanges that showed $19,500 as a key area for sellers.

Vijay Boyapati, a Bitcoin researcher, similarly said that the $19,500 to $19,550 range remains as the last sell wall before a new all-time high.

If Bitcoin does not retest the $19,500 area again in the next several hours, this could mean that another drop is likely. Considering that it would be the last resistance until the new all-time high, traders expect some reaction from sellers.

Another small pullback would benefit Bitcoin because it would further neutralize the futures funding rate. The funding rate of BTC futures has increased once again to 0.07% on Binance Futures and other exchanges.

Considering that the average funding rate of Bitcoin is 0.01%, another short-term drop to reset the derivatives market may even strengthen the upward momentum.

Shorts being at levels unseen since April is a variable

However, a variable to consider is that the number of shorts in the Bitcoin market is at its highest since April 2020.