In the short term, the crucial technical resistance level is $ 35,500. Over the past 24 hours, Bitcoin has continuously rejected at this level. When Bitcoin rose to around $ 35,500 on Binance earlier on January 13, it saw an 8% drop shortly thereafter, indicating that there is strong pressure to sell.
A pseudonymous trader known as the “Byzantine General” sketch that there are additional sell orders on Coinbase in the range of $ 36,500 to $ 37,000, saying “I’m still not taking bets” and adding that he “casually buys cash drops” . There is significant uncertainty in the market due to the large price movements between $ 31,000 and $ 35,000 without any breakout or bearish invalidation. The trader also noted that Bitcoin is currently at ‘VWAP’ resistance, with high selling pressure at key resistance levels.
The price of Bitcoin (BTC) is between $ 32,000 and $ 35,000 after the big drop in color on January 12. Traders remain mixed around BTC’s short-term trajectory due to various mixed signals. Some are bullish because of the $ 30,500 rapid recovery and reopening of its products to new investors. Others are cautious due to the continued rejection into the $ 35,000 to $ 36,000 resistance range.
However, the general sentiment around Bitcoin has been increasingly positive over the past 24 hours. The rapid correction from $ 41,000 to $ 30,500 resulted in many over-indebted buyers and long contracts. Prior to the correction, the Bitcoin futures funding rate hovered over 0.1% most of the time, meaning the market was significantly over-leveraged and extremely long.
The term finance rate is a mechanism that balances the market by rewarding buyers when the market is predominantly short and sellers when the market is majority. In the Bitcoin futures market, the average funding rate is 0.01%. This means that holders of long contracts must pay 0.01% of their position every eight hours to their short selling counterparty. Because the market has been over-leveraged for so long, when the first big drop happened, the price of Bitcoin started to drop as back-to-back sell-offs occurred.
Following the decline, the futures market became significantly less heated, and most derivative products normalized after seeing a rise in interest. Although open interest in the Bitcoin futures market remains near its all-time high, the market is healthier than before. This increases the likelihood of a new rally in the foreseeable future.
Positive macro stories around Bitcoin
According to Ki Young Ju, CEO of trading data platform CryptoQuant, many institutional investors purchased Bitcoin at around $ 30,000. As such, if the price of Bitcoin falls into the support range of $ 30,000 to $ 32,000, institutions would likely protect that level with large buy orders. This is mainly why Bitcoin saw a strong reaction from buyers on Coinbase and other major US exchanges when it fell to $ 30,500 on January 12. “Coinbase’s exit on January 2 was a three-year high,” Ju wrote. “A speculative guess, but if these guys are behind this bull run, they’ll protect the 30k level. Even if we have a dip it wouldn’t go below 28k.
On top of the likelihood of a prolonged build-up of whales to $ 30,000, there are two key macroeconomic narratives that could strengthen sentiment around Bitcoin. First, several mainstream media publications have reported that US President-elect Joe Biden is expected to appoint Gary Gensler as chairman of the Securities and Exchange Commission. Gensler previously taught a ‘Blockchain and Money’ course, which has since been released for free on MIT OpenCourseWare. In view of this, Andrew Kang, partner of Mechanism Capital said that “the probability of approval of the #BTC ETF has just increased significantly.”
If a Bitcoin exchange-traded fund is approved after years of rejection, it would lead to two things. First, it would further legitimize Bitcoin as an established asset class and store of value. Second, it would allow accredited investors and institutions to reliably invest in Bitcoin. Currently, the Grayscale Bitcoin Trust and the Bitwise 10 Crypto Index Fund are among the go-to institutional vehicles for investing in cryptocurrencies, including Bitcoin.
Grayscale has reported a significant increase in demand in recent months. On January 12, Grayscale reopened its products to new investors, including investments in GBTC after it closed in December 2020. If institutions were the main driver of the recent Bitcoin rally, new entries in GBTC could lead to a new uptrend. in a close future. term. Coincidentally, it was during the fund’s closing period that BTC experienced a relatively large correction.
What happens next?
For the foreseeable future, Bitcoin’s bullish and bearish scenarios revolve around two key levels: $ 30,000 and $ 35,500. As long as Bitcoin maintains $ 30,000 as a strong support area, the likelihood of a breakout above $ 35,500 increases. A net move above $ 35,500 would likely signify a continuation of the rally, which could cause a further rise beyond its current all-time high.
Traders and technical analysts claim that the current Bitcoin price trend is quite similar to where Bitcoin fell to around $ 16,000 at the end of November 2020. At that point, Bitcoin consolidated for two weeks before finally finally burst and go back up to $ 20,000. BTC price could see a similar trend where it bounces off the $ 30,000 support and attempts to break the resistance range of $ 35,500 to $ 36,000 in the short term.
A pseudonymous trader known as “Neko” said that Bitcoin’s rebound has been encouraging so far. He expects BTC to retest $ 36,000 soon, which would leave the way open for a possible rally to all-time highs above $ 42,000: “Very impressive buyouts have been shown. I really like these wicks on the underside of these h4 candles. I think we have found the local background yet. “
Another variable to take into account in the short term is that the so-called “Kimchi premium” in South Korea has started to decline. When Bitcoin saw its trading above $ 40,000, the premium was constantly hovering above 5%. Since the fall, the premium has fluctuated around 2% to 3%. This could indicate that retail demand for cryptocurrencies in the South Korean market has slowed slightly after the correction.
Bitcoin also traded 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 using Tether (USDT), due to the minor difference between Tether and the US dollar in the forex market. Ideally, for the uptrend to resume, the premium on the South Korean exchanges and Coinbase should return.