Bitcoin (BTC) price hit a record high on February 11 when it surpassed $ 48,500 on major exchanges. Since then, the dominant cryptocurrency has strengthened, showing no real momentum to break out of record highs in the near future. But analysts are unhappy with the merger after crossing a new peak.
In general, market commentators say that when an asset moves slowly or consolidates after an explosive uptrend, it is a sign of market strength. As for Bitcoin, it is imperative to stabilize after a strong rally in order to reach the highs at the moment due to the crowded futures market. If the bitcoin price continues to rise without a proper reset, it will increase the likelihood of significant long term pressure in the short term.
A prolonged squeeze occurs in the futures market when the market is flooded with buyers or long contracts, and as a result, the funding rate becomes very positive. When the funding rate exceeds 0%, buyers must pay a portion of their counterparty position to the card seller every eight hours. This mechanism is used by futures exchanges to balance the market so that the market does not swing in one direction for an extended period of time.
Given the negative impact of disruptions in the futures market and the fact that Bitcoin’s futures funding rate is constantly hovering above 0.1%, which is 10 times the normal range of 0.01%, longer consolidation is considered optimistic for Bitcoin. But that’s on the assumption that BTC is still above the main areas of support, seemingly set at $ 44,214, which is an important support level for whale groups in the short term.
Where will Bitcoin go?
In an interview with Cointelegraph, Guy Hirsch, CEO of US eToro, confirmed that Tesla’s $ 1.5 billion purchase of BTC blew up the market. The news sparked a major shift in sentiment, forcing many investors to see it as a turning point in the history of the cryptocurrency market and how public companies will perceive cryptocurrencies. This news also came when MicroStrategy held a seminar with over 1,400 companies to discuss Bitcoin.
Hirsch explained that the synergy between Tesla, which bought Bitcoin, and MicroStrategy continue to spread awareness of BTC’s profit as a store of value and corporate investment, prompting more public companies to follow similar announcements. Hirsch stressed that if such a trend occurs before the end of the second quarter, a $ 50,000 squeeze is likely, adding:
“We can look back to MicroStrategy and Tesla as leaders in this new way of using corporate capital to value monetary assets rather than just being content with them, and see this as a turning point not only in Bitcoin history, but also in how listed companies operate. and work for shareholders. ”
Traders are usually optimistic about the price of bitcoin in the short to medium term. A trader under the pseudonym LUMA said that “the relative lack of Bitcoin is minimal” at the moment, given the strong market sentiment around it. The trader noted that “$ 50,000 is inevitable,” and it doesn’t matter if BTC falls “a little earlier.”
The black swan event could theoretically trigger a 30-40% retracement in the price of bitcoin, as seen in recent uptrends. However, Bitcoin is seeing a unique level of consumer demand from wealthy investors and institutions that have not been active in recent years.
The influx of new institutional investors is the main variable that can lift BTC’s momentum to the $ 50,000 to $ 70,000 range. The continuing rise in liquidity in the traditional financial market is fueling the appetite for inflation hedge funds, which include bitcoin and gold.
Possible bearish case for Bitcoin
A cryptocurrency whale known as Varo said there is one scenario in which Bitcoin could face potential short-term failure. The trader explained that if BTC struggles to get out of $ 48,000, it could see momentum drop and see a 5-15% drop for the foreseeable future.
This will be a positive trend for BTC, he said, as it will provide access to some liquidity and large buy-in orders in the low $ 40,000 range: “I was one of the first to order 52,000 about a week ago, and now that’s all. applauding and shouting for 50+, and Bitcoin has problems. With that kind of resistance, it’s not a bear, it just needs more fuel, that’s all. ”
The main factor that could counteract the potential bearish market sentiment for Bitcoin is the decrease in pressure from miners. Over the past two weeks, miners have been selling large volumes of bitcoins, which has led to short-term changes in bitcoin prices.