Bitcoin (BTC) price rose to $ 10,272 on July 26 in an unexpected weekend rally. He settled $ 74 million on long contracts on BitMEX alone, surprising many traders.
Bitcoin’s hourly price chart. Source: TradingView.com
There seem to be two main reasons behind Bitcoin’s sharp rise from $ 9,700 to over $ 10,200. They are the liquidation of short circuits and over-leveraged traders who make profits from altcoins too widespread.
Profit-taking pattern observed as Bitcoin spikes
When the price started to rise, the main alternative currencies, as well as the good performing DeFi tokens, started to fall. Ethereum decreased from $ 322 to $ 311, and DeFi tokens, including Aave and YFI, experienced strong rejections.
Cryptocurrency Market Performance July 26. Source: Coin360
Simultaneous rejections of major alternative currencies and rising Bitcoin prices suggest that traders benefited from the recent manifestations of alternative currencies. As traders moved their gains from altcoin to Bitcoin, it possibly triggered an uptrend of BTC, while altcoins declined.
ETH, as an example, rose from $ 247 on July 23 to $ 322 at the peak of the day, posting a 30% gain. Despite strong sentiment around alternative currencies, investors are possibly taking a more cautious approach in hedging their gains.
Massive liquidations of short contracts.
When Bitcoin initially topped $ 10,000, it triggered the liquidation of short leveraged contracts. When BTC reached $ 10,200, it caused a cascade of liquidations, totaling $ 74 million.
Bitcoin has seen many phases when more than $ 50 million is settled in short or long term contracts. But for this to happen within a few hours is less typical.
The massive liquidations of long contracts at $ 10,000 also suggest that the $ 10,000 to $ 10,200 remains an area of great resistance. As soon as BTC hit $ 10,200, the price fell below $ 10,000, marking a short-lived recovery.
Investors express optimism about BTC’s short-term price trend
As Bitcoin’s price rebounded strongly in recent weeks, some industry executives and investors expressed optimism towards BTC and ETH.
“Are you ready?” Grayscale CEO Barry Silbert tweeted when Ether’s price broke out of the dreaded $ 280 resistance level on July 25.
Meanwhile, well-known trader Peter Brandt expects the Bitcoin price to hit a new record and eventually hit $ 50,000. He said:
“That’s where my head is. The massive symmetric triangle at $ BTC points to ATH, then $ 50k. “
But some variables could affect the short term price trend of BTC price. First, Bitcoin’s financing rate is projected to exceed 0.04% on BitMEX. That is almost four times higher than the average financing rate of 0.01%. It means that the majority of the market is taking long positions.
For Ethereum’s ETH token, the financing rate is around 0.1%, suggesting that the recovery is starting to overheat. In February, the ETH price was rejected at $ 280 as its financing rate exceeded 0.2%, and when the overwhelming majority of the market yearned for the asset.
Second, $ 10,000 has acted as a key psychological level for Bitcoin since October 2019. If BTC rejects $ 10,200, it would still be lower than the previous peak in February 2020 at $ 10,473.
Although it would be over the top to call it a lower high formation, it could show that the price of BTC has not deviated from the multi-month range.
