Bitcoin’s price officially topped $ 10,400 on July 27 as a result, breaking a multi-year range. Traders are now mixed on where the price of Bitcoin (BTC) will go, as many indicators and data points show conflicting trends.
The overall sentiment about Bitcoin and the cryptocurrency industry has been positive since April. The U.S. Office of the Comptroller of the Currency has given banks permission to operate cryptocurrency custody services, institutional investors have continually invested in Bitcoin and other major cryptocurrencies through Grayscale, and more recently, the stablecoin Tether (USDT) saw its biggest influx in eight months.
A confluence of strong fundamental factors related to regulation and infrastructure has apparently improved the perception of Bitcoin by the mainstream. That has coincided with an increase in liquidity triggered by the high influx of Tether and the recovery of open interest in the futures market. An increasing influx of Tether is an important metric because it is the largest stablecoin in the cryptocurrency market. The numbers suggest that the demand for the stablecoin is increasing, indicating a growing appetite for crypto assets.
Some macro factors could have fueled the demand for Bitcoin in recent months. Since April, the US dollar has been in decline relative to other major reserve currencies. Investors like billionaire Ray Dalio have pointed to the ongoing dispute between the United States and China as the most important factor. As the US dollar fell, the price of gold rose. Historically, a weak dollar has caused the stock market to underperform, which in theory would boost gold. Given the recent price correlation between gold and Bitcoin, there is a chance that a weakened dollar will indirectly benefit BTC.
The correlation between Bitcoin and gold in recent months. Source: Skew.com
Depending on the market structure, traders expect Bitcoin’s price to vary in the short term. BTC has broken out of a critical resistance level at $ 10,500. After such a powerful upward price movement, some stability would cool the market. Michaël van de Poppe, a full-time trader on the Amsterdam Stock Exchange and a Cointelegraph contributor, said Bitcoin could soon see a new range. Considering that $ 12,000 has acted as a strong resistance in the past, van de Poppe suggested that a range of $ 9,700 to $ 12,000 could materialize.
A new range of Bitcoin could be formed. Source: Michaël van de Poppe
When Bitcoin saw an explosive upward movement in prices, trading volumes increased overall. According to Skew, July 27 was the second-highest-volume day in Bitcoin’s history. As BTC emerges from a record recovery, below is an overview of the bullish and bearish scenarios that could affect the price in the near term.
Bullish scenarios for Bitcoin in the short and medium term
Some traders and investors foresee a continuation of the continued Bitcoin rally. According to the cryptocurrency trader known as Ethereum Jack, BTC recently saw a clean breakout. It marked the fifth rise to a resistance level that has been sustained since September 2019. The operator emphasized that Bitcoin’s price trend could extend too long if the rally resumes, but noted that it has all the characteristics of a prolonged uptrend. :
“$ BTC provides the cleanest break test setup I’ve seen in a long time, while every corrective wave since 4K has been a vertically accumulated accumulation. This has all the features for a very extended fifth, apart from BTC which generally loves extended fifths. “
Cryptocurrency trader Koroush AK said Bitcoin currently has three bullish arguments. First, the 0.618 Fibonacci level measured between $ 9,300 and $ 11,421 has to hold. The 0.618 level marks an important level in the Fibonacci retracement system, and generally leads to a trend reversal when it defaults. Second, the $ 10,400 level acts as a robust horizontal support. Third, as long as the $ 10,170 level is maintained, the argument for a higher low is intact.
In layman’s terms, Koroush AK believes that if the Bitcoin price stays above $ 10,170, $ 10,400, and $ 10,622, the price trend will continue to be bullish. The $ 10,170 level, or higher low, is particularly critical in the technical analysis as it suggests a strong bullish trend. A higher-lower pattern is formed when the most recent low point of an asset is higher than the previous low points.
A breakdown of the key levels for Bitcoin in the short term. Source: Koroush AK
Similarly, the Bitcoin trader known as Satoshi Flipper suggested that there is little resistance between $ 10,886 and $ 11,400. As BTC just emerged from a break above $ 11,000 for the first time since August 2019, traders apparently anticipate volatility in the new range.
In addition to the fundamentals, tech researcher Kevin Rook emphasized that Bitcoin’s “HODLing” level is at a record level. That metric indicates that many long-term holders of BTC are reluctant to sell the best cryptocurrency. It could show that BTC is currently in an accumulation phase, with Rook stating: “62% of Bitcoin’s supply (11,400,000 BTC) has not moved in at least a year. Speculators are gone, HODLing is at its highest point. “The first major breakout in nearly 11 months, a surge in long-term BTC holders and a favorable market structure strengthen Bitcoin’s bullish outlook.
Bearish cases for BTC in the short term
However, in the short term, some traders expect a cooling in the cryptocurrency market. After a huge rise in Bitcoin’s price, various metrics suggest that the recovery has overstretched. The most prominent metric of all is probably the financing rate.
Bitcoin futures contracts with no expiration dates are called perpetual swaps. They are the most widely used futures contracts in the cryptocurrency market, as they are less complex to trade. But the lack of expiration dates is balanced by a mechanism called financing, which forces holders of long or short contracts to pay a fee to their counterpart once every eight hours, depending on market sentiment.
When the financing rate of Bitcoin’s perpetual exchanges turns positive, it means that the majority of the market is long on the price of BTC. For example, BitMEX has shown a financing rate of around 0.077% for Bitcoin’s perpetual exchanges in the past two days. That shows that the overwhelming majority of the market is yearning for BTC, leaving the cryptocurrency vulnerable to possible prolonged compression.
Bitcoin perpetual exchange financing rates on major exchanges. Source: biased
Some traders claim that perpetual swap financing rates are simply too high to be sustained. Referring to financing rates, the cryptocurrency trader known as General Byzantine said: “This needs to cool down a bit.”
In terms of market structure, Bitcoin Crypto Capo technical analyst said that BTC could confirm its uptrend if it stays above $ 10,500 and sets it as a clear support level. But if BTC rejects in the short term and falls below the level, he said there is a possibility of a UTAD forming. A UTAD, which means “push up after distribution”, is a pattern that is part of the Wyckoff Method. It is formed when an asset demonstrates a counterfeit and proceeds to withdraw. Several traders believe there is still a small chance that the entire BTC uptrend is a bogus recovery. StockCharts describes a UTAD as:
“A UT or UTAD allows large interests to mislead the public about the direction of the future trend and subsequently sell additional shares at high prices to such traders and investors before the discount begins.”
Another well-known cryptocurrency trader known as CryptoWhale said the sentiment around the Bitcoin market is too fearful. The trader noted that the BTC recovery follows “months in the red” and that the cryptocurrency is likely to see a correction.
Overall, the market is apparently divided between traders who believe the rally is widespread and those who see a continuation. There are viable reasons to back up both arguments as funding rates indicate an overheated market and BTC stability above $ 10,500 indicates strong momentum.
