21:28Bitcoin price balances at $10K: Discussing BTC’s next big move
The price of Bitcoin is showing stability above $10,000, and traders explain where BTC’s next big move is headed.
The price of Bitcoin (BTC) has been ranging between $9,800 and $10,500 for nearly a week after a short fall from almost $12,100 seen on Sept. 1. As BTC struggles to show any distinctive price movement, traders are generally cautious.
Over the medium to long term, traders expect Bitcoin to recover and perceive the ongoing consolidation phase as a healthy pullback. From July 16 to Aug. 17, Bitcoin rose from $9,005 to $12,486 on Coinbase, with a pullback arguably necessary to neutralize the futures market
A large portion of Bitcoin’s daily volume comes from the futures market. Cryptocurrency futures exchanges use a mechanism called “funding” to achieve a balance in the Bitcoin market. The mechanism forces long contract holders to compensate short-sellers for a portion of their positions if the market is majority long, and vice versa.
Typically, when the rally of Bitcoin becomes overextended, it causes the futures market to get overcrowded and funding rates to soar. In the event of a pullback, it allows funding rates to stabilize, reducing the probability of a long or short squeeze.
Explaining short-term BTC bearishness
Speaking to Cointelegraph, Dennis Vinokourov, the head of research at crypto exchange and institutional brokerage provider BeQuant, and Guy Hirsch, managing director of eToro trading and brokerage platform, revealed that Bitcoin’s medium-term outlook is positive due to various fundamental and technical factors.
Following the rejection of Bitcoin at $12,000, analysts attributed many factors to the decline of BTC. As Vinokourov pointed out: “The aggressive unwind of crowded positioning related to DeFi assets” could have contributed to the decline. However, other factors like whales taking profit, miners selling off their stashes, and a major South Korean exchange Bithumb reportedly being raided by police all might have applied selling pressure on Bitcoin. Hirsch emphasized that in periods of low volatility, price drops can be intensified when fewer traders are in the market:
Vinokuorov stated that the pullback could benefit Bitcoin in the months ahead, as price rejection is not a negative occurrence if the market were to calm down as a result. He also noted that the leveraged and speculative flow of traders would align after a consolidation period:
Bitcoin’s longer term outlook
Heading into the fourth quarter of 2020, analysts remain neutral or bullish on the price trend of Bitcoin, and an abundance of technical and fundamental factors could buoy the sentiment around BTC from November to December. Historically, BTC performed strongly in the last two months of the year. Most notably, BTC surged to a new all-time high in December 2017.
Potential technical catalysts include the closure of Bitcoin’s monthly candle above $11,600 for the first time since 2017, and reaching the $12,000 resistance level. Albeit briefly, it marked an important breakout after dropping to as low as $3,596 on BitMEX in March 2020.
Fundamental factors that could contribute to the uptrend of Bitcoin are strengthening infrastructure, rising inflation and the near-zero interest rates. A low-interest rate environment boosts the bull case of gold and potentially Bitcoin because it could lower the value of the U.S. dollar. Hirsch said:
He also added that a Bitcoin breakout is possible in the near term if the perception of Bitcoin as a hedge against inflation improves. Throughout the past month, public companies and institutional investors have purchased billions of dollars in Bitcoin. MicroStrategy, a company listed in the U.S. stock market, invested $250 million in BTC as the firm’s primary treasury asset.
Based on the increasing demand for Bitcoin as a potential hedge against inflation as well as the tone around BTC set by Wall Street giants like Paul Tudor Jones, Hirsch believes another major upsurge is a possibility: “Federal Reserve’s attempt to prop up the economy might fuel investors to look more closely at Bitcoin for a number of reasons, resulting in a positive uptick for the largest digital asset.”
BTC enters uncertainty
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