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Bitcoin’s brief trip to $13.2K suggests profit-taking price correction

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The price of Bitcoin (BTC) surpassed $13,000 for the first time since June 2019. The optimism around PayPal supporting crypto purchases led the overall market sentiment to brighten within a short period. Immediately after the PayPal news was reported, the price of Bitcoin increased from $12,300 to $13,200 at the day’s peak. Although the medium-term outlook of the cryptocurrency market remains positive, analysts are not dismissing the likelihood of a pullback.

Bitcoin surged 25.5% within a 13-day span from Oct. 8. Initially, the BTC rally began as profits from altcoins and decentralized finance tokens cycled into BTC. Some industry players like Sam Bankman-Fried, CEO of derivatives exchange FTX, revealed a cautious stance toward DeFi tokens, admitting that he placed a 200 net Yearn.Finance (YFI) short, equivalent to around $2.75 million. Although the shorts likely have not caused DeFi to slump, it showed that the sentiment around DeFi is dwindling.

However, analysts are slightly cautious in the immediate-term in the price trend of Bitcoin. The overwhelming majority of BTC holders are in profit, which could lead investors to take cash out. BTC is also approaching $14,000, which previously acted as a major resistance level for BTC in mid-2019. In June 2019, when BTC hit $13,970 on Binance, it quickly pulled back to as low as $10,525 on the next day. In the 21 days that followed, BTC declined to $9,252, recording a 35% drop.

Is a profit-taking slump near?

Guy Hirsch, U.S. managing director of eToro’s trading platform emphasized to Cointelegraph that the PayPal news is a “very big deal” as prominent investors and venture capitalists, including Social Capital chairman Chamath Palihapitiya, echo a similar sentiment. The venture capitalist said every major bank is “having a meeting about how to support Bitcoin.”

The cryptocurrency market has been particularly optimistic about the prospects of PayPal integrating crypto for two main reasons. First, it follows the Bitcoin support from another major payments conglomerate, Square. Second, it reaffirms the perception of cryptocurrencies as an established asset class. Albeit the positivity around the news, in the short-term, Hirsch said a drop followed by a steady climb could occur:

“This increased adoption is likely to drive prices higher, but I do think it’s too soon to fully grasp the impact of this announcement on the markets, and wouldn’t be surprised to see profit taking cause prices to drop in the short-term before they begin a slow and steady climb upward.”

Denis Vinokourov, head of research at crypto exchange and broker Bequant, believes that in the near term, at least, consolidation would lead to a healthier uptrend for BTC rather than an exponential upsurge. There is little resistance between $14,000 and $20,000 due to the previous bull cycle in 2017 ending abruptly. But, Vinokourov said, that does not mean the ride to a new all-time high would be easy.

When 98% of Bitcoin addresses are in profit, as Glassnode researchers reported, a profit-taking phase is inevitable. Whether new inflows into the Bitcoin market would offset profit-taking from existing investors and hodlers is the variable in the near term. So currently, exchange inflows is set to become a highly relevant statistic, which recently dropped to a yearly low. If exchange inflows begin to increase again, it would signify that a take-profit pullback is probable, according to Vinokourov. He added:

“Overall, markets are approaching territory that doesn’t offer much in the way of price discovery potential but, for healthy markets, one would expect consolidation as opposed to exponential one way traffic.”

There is a strong possibility that BTC would see a continuation of its ongoing rally after a short consolidation period, as according to the data from Skew, all Bitcoin markets, including spot, derivatives and options, are showing a high level of demand after the PayPal news. Analysts at Skew said, “Bitcoin showing some solid activity following the PayPal news across spot, futures and options. Big sessions.”

The next range for BTC in the medium term?

If Bitcoin sees a profit-taking pullback and consolidates, analysts expect the next range of BTC to form between $12,500 to $13,500 and stay there for the upcoming months until the next breakout. The $12,500 mark is important because it has acted as a strong resistance level, and BTC remaining above confirms it as a stronger support area. The $13,500 to $14,000 area has been a heavy multi-year resistance range.

But a tight range under a key resistance level that has pushed BTC down for nearly four years puts BTC in a positive position, placing a new record-high at arm’s length, especially when the next breakout occurs. Another variable for BTC is whether new capital would continue to flow into Bitcoin or diversify into the altcoin market. If the former happens, it would raise the probability of a BTC breakout by the year’s end.

There are two likely catalysts that could further spur another breakout of the next Bitcoin range in the medium term. Another major financial institution could announce support for BTC or allocate a fraction of their capital into BTC, fueling retail interest. The institutional demand could also spill over to the retail and spot markets, which are already seeing high daily trading activity.

Binance’s Bitcoin/Tether (USDT) trading pair, for instance, has processed $1.3 billion worth of volume in the past 24 hours. While the CME Bitcoin futures market’s open interest has also increased alongside the volume of LMAX Digital and Bakkt, indicating a contango of rising volume across institutional and spot markets. Heading into 2021, the noticeably growing interest toward Bitcoin would likely continuously fuel the appetite for the dominant cryptocurrency.





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Bitcoin

Bitcoin Pushes Towards Highs as Spot Market Gains Full Control

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  • Bitcoin has seen some incredibly strong price action throughout the past few days and weeks, with the selling pressure seen at its key resistance levels not slowing it down
  • Overnight it was able to rally up towards its previous all-time highs, stopping just short of them when bears stepped up the selling pressure at $19,500
  • The rejection here was quite intense and caused it to briefly break below $19,000
  • It does appear to be entering yet another consolidation phase, which could mean it will see a prolonged bout of sideways trading in the near-term
  • One trader is noting that although the cryptocurrency is showing signs of being overheated in the short-term based on multiple metrics, the derivatives market is no longer in control

Bitcoin and the entire crypto market are showing some immense signs of strength. Bulls appear to be in full control, but bears are trying to gain some control following the cryptocurrency’s recent $19,500 rejection.

Sellers have pushed the crypto as low as $18,800, with the buying pressure here being fairly intense.

If it continues holding strong in the near-term, there’s a strong possibility that this level will help catalyze a rebound past the $19,000 level, ultimately leading it to see further upside.

One analyst is noting that although the crypto shows signs of being overheated, the fact that the spot market controls its price action indicates that these signs may be wholly irrelevant.

Bitcoin Rallies Higher as Analysts Eye Upside 

At the time of writing, Bitcoin is trading down marginally at its current price of $18,950. This is a hair below the key $19,000 level that has been acting as resistance.

Any sustained decline below this level could prove dire for BTC, potentially causing it to see further near-term losses.

This ongoing dip comes shortly after it tested $19,500, just a few hundred dollars below its previous all-time high.

Spot Market Takes Control of BTC 

Typically, the derivatives market controls Bitcoin’s price action, which makes using indicators like funding rates quite useful.

During this rally, however, the spot market is in control, which largely makes these indicators useless at the moment. As one analyst noted:

“It’s kinda crazy, but this time is actually different. Derivs are clearly overheated, but the spot market is in control right now.”

Image Courtesy of Byzantine General. Source: BTCUSD on TradingView.

How Bitcoin reacts to $19,000 heading into its daily close should provide some serious insights into where the entire market will trend in the days and weeks ahead.

Featured image from Unsplash.
Charts from TradingView.





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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.