In the short term, the crucial technical resistance level is $ 35,500. Over the past 24 hours, Bitcoin has continuously rejected at that level. When Bitcoin rose to around $ 35,500 on Binance on January 13, it saw an 8% drop shortly thereafter, indicating there is strong selling pressure.
A pseudonymous operator known as “Byzantine General” highlighted that there are additional sell orders on Coinbase in the range of $ 36,500 to $ 37,000, saying “I’m not taking positions yet” and adding that he is “casually buying Dips on the spot market.” There is significant market uncertainty due to large price swings between $ 31,000 and $ 35,000 with no breakouts or bearish invalidations. The trader also noted that Bitcoin is currently at “VWAP” resistance, with high selling pressure at key resistance levels.
The price of Bitcoin (BTC) ranges from $ 32,000 to $ 35,000 after the big ladder slide on Jan.12 Traders remain mixed around the short-term trajectory of BTC due to various mixed signals. Some are on the rise due to the rapid recovery of $ 30,500 and the reopening of its products by Grayscale to new investors. Others are wary due to continued rejection at the $ 35,000- $ 36,000 resistance range.
However, the general sentiment around Bitcoin has been increasingly positive in the last 24 hours. The rapid correction from $ 41,000 to $ 30,500 wiped out many over-leveraged buyers and long contracts. Before the correction, the Bitcoin futures funding rate hovered around 0.1% most of the time, which means the market was significantly overlevered and overwhelmingly bullish.
The futures financing rate is a mechanism that balances the market by rewarding buyers when the market is mostly short and sellers when the market is mostly bullish. In the Bitcoin futures market, the average funding rate is 0.01%. This means that long contract holders have to pay 0.01% of their position every eight hours to their short selling counterpart. Because the market was over-leveraged for so long, when the first big drop occurred, the price of Bitcoin began to plummet as back-to-back sell-offs occurred.
After the crash, the futures market has warmed much less, and most derivatives have normalized after seeing a surge in interest. Although the open interest of the Bitcoin futures market is still near its all-time high, the market is healthier than before. This increases the probability of a further rally in the foreseeable future.
The positive macro narratives surrounding Bitcoin
According to Ki Young Ju, CEO of trading data platform CryptoQuant, many institutional investors bought Bitcoin for $ 30,000. Therefore, if the price of Bitcoin falls to the support range of $ 30,000 to $ 32,000, institutions will likely protect that level with large buy orders. This is the main reason why Bitcoin saw a huge backlash from buyers from Coinbase and other major US exchanges when it fell to $ 30,500 on January 12. “Coinbase’s outflow on January 2 was the highest in the last three years,” Ju wrote. “Speculative assumption, but if these guys are behind this run, they’ll protect the 30k level. Even if we have a drop, it wouldn’t drop below 28k.”
On the likelihood of a prolonged whale buildup at $ 30,000, there are two key macro-narratives that could spice up sentiment around Bitcoin. First, several publications from the mainstream media have reported that US President-elect Joe Biden is expected to appoint Gary Gensler as SEC Chairman. Gensler previously taught a “Blockchain and Money” course, which has since been published for free at MIT OpenCourseWare. Considering this, Mechanism Capital partner Andrew Kang, said that “the probability of approval of a #BTC ETF just went up significantly.”
If a Bitcoin exchange traded fund is approved after years of rejection, this would lead to two things. First, it would further legitimize Bitcoin as an established asset class and store of value. Second, it would allow reputable investors and institutions to reliably invest in Bitcoin. Currently, the Grayscale Bitcoin Trust and the Bitwise 10 Crypto Index Fund are some of the institutional vehicles for investing in cryptocurrencies, including Bitcoin.
The Grayscale Bitcoin Trust has reported a significant increase in demand in recent months. On January 12, Grayscale reopened its products to new investors, including investment in GBTC after closing in December 2020. If institutions were the main driver of the recent Bitcoin rally, new entries on the GBTC could lead to a new short-term uptrend. Coincidentally, it was during the fund’s closing period that BTC experienced a relatively large correction.
What comes next?
In the immediate future, the bullish and bearish scenarios for Bitcoin revolve around two key levels: $ 30,000 and $ 35,500. As long as Bitcoin maintains $ 30,000 as a strong support area, the probability of a breakout above $ 35,500 increases. A clean move above $ 35,500 would likely spell continuation of the rally, which could result in a new upward leg beyond its current all-time high.
Traders and technical analysts say that the current Bitcoin price trend is quite similar to when Bitcoin fell to about $ 16,000 in late November 2020. At that time, Bitcoin consolidated for two weeks before finally breaking out and rising. at $ 20,000. BTC price could see a similar trend where it bounces off the $ 30,000 support and attempts to break out of the $ 35,500 to $ 36,000 resistance range in the short term.
A pseudonym trader known as “Neko” said that Bitcoin’s bounce has been encouraging so far. He anticipates that BTC will retest $ 36,000 soon, leaving the way open for a possible rally to all-time highs above $ 42,000.: “Very impressive buybacks shown.” I’m really liking those wicks at the bottom of those h4 candles. I think we’ve found the local fund for now. “
Another variable to consider in the short term is that the call “before the Kimchi“In South Korea it has started to decline. When Bitcoin saw it trading above $ 40,000, the premium was consistently above 5%. Since the crash, the premium has been hovering between 2% and 3%. This could indicate that the retail demand for cryptocurrencies in the South Korean market has cooled slightly after the correction.
Bitcoin has also been trading lower on Coinbase, which is unusual as it has been consistently higher than Binance throughout the rally. Coinbase also naturally has a higher BTC price than other major exchanges that use Tether (USDT), due to the small difference between Tether and the US dollar in the currency market. Ideally, for the uptrend to resume, the premium on both South Korean exchanges and Coinbase would have to return.