The price of bitcoin (BTC) is showing signs of recovery after breaking through the $40,000 resistance zone. The combination of optimistic data points about the blockchain and a favorable market structure has analysts and traders anticipating an imminent breakout of bitcoin to a new high.
In the short term, the $38,000 and $40,000 levels remain the biggest hurdles for bitcoin. The further BTC moves away from the $40,000 level, the greater the chance of a potential correction. Therefore, it is very important for bitcoin to pass the $40,000 mark and stay above it in the near future. Bitcoin has spent nearly three weeks below $38,000, causing the short-term price cycle to stagnate and lose momentum. The 6th. In February, bitcoin finally broke through the $38,000 level and set it as a support level.
One of the positive aspects of the blockchain that increases the chances of a bitcoin bust is the increase in the number of whale addresses. Santiment analysts have noted that bitcoin whales continue to accumulate despite the rising price of the asset : The #Bitcoin whales (addresses over $1000BTC) have not stopped accumulating, while the mid-level traders ($10-1000BTC) have not stopped accumulating profits while the price hovers around $38,000. Meanwhile, small addresses are making a comeback!
Wale’s accumulation of bitcoins coincides with a significant exit from Coinbase, which usually indicates that high-yield investors are buying bitcoins. A pseudonymous trader on Twitter, known as Johnny, said: It is coincidence that we have seen huge amounts of $BTC removed from the coin base. The first bull market correction of 2021 is over.
Scott Melker, a cryptocurrency trader, noted that bitcoin has a favorable technical market structure, in addition to bullish data and fundamentals. He explained that bitcoin has a huge bullish flag structure that, if realized, could see BTC reach $63,000 in the near future : $BTC could potentially break out of a huge bullish flag that would technically lift the price to $63,000, which expresses optimism about bitcoin’s price cycle in the near term.
What will bitcoin look like in the near future?
Speaking to Cointelegraph, Guy Hirsch, managing director of US social trading platform eToro, said there is a shift of capital from bitcoin to decentralised finance and other allcoins. The market has become completely risky, with DeFi-related markers rising 30-100% in a single day. The demand for altcoins, which are seen as riskier and more profitable, has led to a slowdown in bitcoin’s momentum.
However, Hirsch noted that long-term sentiment towards bitcoin remains bullish. He explained that bitcoin has been in a narrow trading range for some time, meaning it trades in a narrow range. That will change if the price of bitcoin stabilizes above $40,000, Hirsch said, because that will cause a surge in interest in bitcoin for a short period of time. Based on options market data, Hirsch said there is a lot of open interest at $52,000 and $56,000, which is where bitcoin could be headed. He added:
I’d be surprised if bitcoin doesn’t break through the $40,000 mark in the coming months. There are no real support levels for this price as it only trades for a very short period of time. However, options positioning can be a good starting point if you are trying to get an idea of where professional traders think the markets are headed.
Bitcoin faltered last week as the decentralized financial market outperformed major cryptocurrencies, including bitcoin and Ether (ETH). Hirsch said many investors, including institutions, have seen opportunities for higher returns in the DeFi market. As a result, he said, bitcoin earnings will be converted to altcoins, leading to an altcoin season. In the long run, however, Hirsch thinks the benefits will likely accrue to bitcoin, which he explains as follows:
This reversal of capital, often called seasonal change, often occurs after bitcoin reaches new highs and is often followed by a sale of these assets in BTC. In the short term, sentiment is neutral, and this is most evident in the latter stages of bitcoin’s trading in the range; but in the long term, sentiment is still bullish, as evidenced by PayPal’s admission this week that it was surprised by the number of transactions of crypto assets on its platform.
strategists predict net profit of $40,000
Investors, researchers and strategists from Bequant, Lmax Digital and CrossTower told Cointelegraph that they expect bitcoin to likely manage to surpass $40,000 by the time demand explodes in December 2020. They believe that bitcoin’s recent consolidation does not show weakness in the price trend.
Denis Vinokurov, head of research at crypto brokerage platform Bequant crypto, said that after a long time below $38,000, BTC has shown an effective price opening that in the past has led to a strong reversal due to a lack of price information. He added that once the $40,000 mark is crossed, it will be difficult to predict what will happen next:
Little information remains because the previous vertices represent a natural level transition. But after that, anything is possible, and the next step is uncertain.
Chad Steinglass, head of trading at cryptocurrency investment platform CrossTower, said he would see an explosive rise once bitcoin breaks through the $40,000 mark. A similar scenario played out in December 2020, when bitcoin struggled to break out of the $30,000 level. Once it did, it rose pretty quickly to its highest ever point of $42,000. According to him:
If new investment demand can break through this wall of sell interest and bitcoin breaks through 40K again, and especially if it doesn’t make new all-time highs, I expect the volumes of these risk-off sellers to evaporate quickly, which could pave the way for another rise.
Joel Krueger, crypto-currency strategist at institutional crypto-currency exchange Lmax Digital, believes bitcoin could reach the $40,000 level, creating a more significant area of resistance. He noted that the current price action shows consolidation after a big rally and stressed that consolidation is healthy for bitcoin.
However, he was more cautious in predicting a continuation of bitcoin’s upward movement after breaking through the $40,000 barrier, stating that we don’t think the market should expect a significant continuation of the upward movement beyond $40,000. He said weekly and monthly technicals are still in heavily overbought territory, suggesting BTC is moving into risky territory.