Bitcoin
Bitcoin price enters consolidation, but is a rally past $50K now inevitable?
Cointelegraph By Joseph Young
The price of Bitcoin (BTC) achieved a new all-time high on Feb. 11 as it surpassed $48,500 across major exchanges. Since then, the dominant cryptocurrency has been consolidating, showing no real momentum to break out of the record-high in the near future. But analysts are not fazed by the consolidation after breaking past a new peak.
Generally, market commentators say that when an asset moves slowly or consolidates after an explosive move upward, it is a sign of a healthy market. For Bitcoin, stabilizing following a strong impulse rally to a record-high is critical at this current juncture due to the overcrowded futures market. If the price of Bitcoin continues to increase without a proper reset pullback, it would increase the probability of a major long squeeze in the short term.
A long squeeze happens in the futures market when the market is overwhelmed with buyers or long contracts, and as a result, the funding rate turns highly positive. When the funding rate is above 0%, buyers have to pay a portion of their position as a fee to their short-seller counterpart every eight hours. This mechanism is used by futures exchanges to achieve balance in the market so that the market is not swayed to one side for a prolonged period.
Considering the negative effect of an imbalance in the futures market and the fact that the Bitcoin futures funding rate is consistently hovering above 0.1%, which is 10 times higher than the normal 0.01%, longer consolidation is optimistic for Bitcoin. But this is given that BTC remains above crucial support areas, which has seemingly been established at $44,214, acting as a crucial whale cluster support level in the near term.
Where is Bitcoin heading next?
In an interview with Cointelegraph, Guy Hirsch, U.S. managing director at eToro, emphasized that Tesla’s $1.5-billion BTC purchase took the market by storm. The news caused a significant sentiment shift, leading many investors to perceive this as a turning point in the history of the crypto market and how public companies would perceive crypto assets. The news also broke as MicroStrategy conducted a seminar with over 1,400 corporations to discuss Bitcoin.
Hirsch explained that the synergy between Tesla buying Bitcoin and MicroStrategy continuing to spread awareness about the merit of BTC as a store of value and a corporate investment would propel more public companies to follow up with similar announcements. If this trend occurs, Hirsch emphasized that a push toward $50,000 is plausible before the end of the second quarter, adding:
“We are likely to look back on MicroStrategy and Tesla as being at the forefront of this new way of using corporate treasury assets to appreciate cash holdings, rather than just sit on them, and see this as a turning point not only in the history of Bitcoin but also of how publicly traded companies act and serve in the best interests of their shareholders.”
Traders are also generally expressing optimism toward both the short-term and medium-term trajectory of Bitcoin’s price. A pseudonymous trader known as Loma said that the “relative downside on BTC is so slim” at the moment, considering the strong market sentiment around it. The trader noted that “$50k is inevitable,” and whether BTC drops “a bit beforehand” is not a major issue.
A “black swan” event could in theory cause a 30%–40% correction in the price of Bitcoin, as seen throughout its past bull cycles. However, Bitcoin is seeing an unprecedented level of buyer demand from high-net-worth investors and institutions who were not as active in the past few years.
The inflow of new institutional investors presents a major variable that could buoy BTC’s momentum toward the $50,000–$70,000 range. The continuous increase in liquidity in the traditional financial market is further catalyzing the appetite for inflation hedge assets, which include the likes of Bitcoin and gold.
A potentially bearish case for BTC
A crypto whale known as Waro said that there is one scenario where Bitcoin could see a potential pullback in the short term. The trader explained that if BTC struggles to break out of $48,000, it could see its momentum dwindle and see a 5%–15% drop in the foreseeable future.
According to him, this would be a positive trend for BTC, as it would allow it to access some of the liquidity and large buy orders in the low $40,000 range: “I was one of the first to call for 52k about a week ago and now everyone is euphoric and screaming for 50+ while bitcoin is having trouble with this resistance. Not a bear, it just needs more fuel, that’s all.”
One fundamental factor that could counter a potentially bearish market sentiment around Bitcoin is the declining selling pressure from miners. In the past two weeks, miners sold large amounts of BTC, placing pressure on the short-term price trend of Bitcoin. Since miners are one of the few external sources of selling pressure in the cryptocurrency market, heightened levels of selling activity can suppress the uptrend of Bitcoin.
Lex Moskovski, a cryptocurrency investor and a quant trader, found that miners “are not so eager to sell their #Bitcoin the last two weeks.” He said that either miners are anticipating the price of Bitcoin to increase substantially in the foreseeable future or have run out of BTC to sell in the near term.
Either way, this trend is a positive catalyst for Bitcoin that could counter the bearishness around the crypto market and push BTC toward a new all-time high above $50,000.
Yashu Gola
A relief bounce in the Bitcoin market Thursday did little in offsetting its prevailing correction bias as its price slipped inside a critical support area.
The BTC/USD exchange rate touched an intraday low of $45,000 during the early Asian trading session Friday, down by up to 22.90 percent from its record high established earlier this week. Traders held on to $45,000 and the levels around it as support, given the range’s historically-verified capability of capping downside corrections.
Bitcoin Support Confluence
Nonetheless, the latest downside move appeared much stronger, raising possibilities that bitcoin would extend its decline further lower.
“[I’m] keeping an eye on the $44ks — tested once, but a break below there likely sends price back down to $40k,” alarmed Josh Rager, the co-founder of BlockRoots.com. “And if price makes way to $40k — you know it’s going to wick in the mid to upper $30ks. [It] could bounce here — but going to take it level by level/day by day.”
Bitcoin is down over 22 percent from its record high. Source: BTCUSD on TradingView.com
Mr. Rager’s downside target at $40,000 converged well with the blue wave in the chart above.
It represents the 50-period simple moving average (50-SMA) on Bitcoin’s daily chart. The wave has underpinned the cryptocurrency’s uptrend throughout 2020. Many instances showed the price breaking below the 50-SMA but only to reclaim the wave later to confirm the market’s bullish bias.
Analyst Willy Woo’s floor model—which has zero evidence of turning false—also alerts about hard price support near $39,000. Mr. Rager agreed that Bitcoin could fall to $40,000 in the coming sessions while forming a wick towards $38,000-39,000. The cryptocurrency may resume its uptrend at a later stage.
Psychological Price Floors
Bitcoin rallied by almost 100 percent in 2021 to hit an all-time high above $58,000. Its gains appeared on growing institutional adoption, led by Tesla’s $1.5 billion investment into the cryptocurrency and its intentions to use the decentralized token as a form of payment for its services and products.
This week, mobile payment app Square announced that it had also upped its Bitcoin reserves by investing another $170 million into the cryptocurrency. The Jack Dorsey-headed firm had added $50 million worth of bitcoins to its balance sheet late last year.
Nasdaq-listed business intelligence firm MicroStrategy also took a similar but heightened call to increase its bitcoin exposure. It put $1.06 billion to purchase another stash of the digital assets, pushing its total reserves from around 71,000 BTC to above $90,500 BTC.
Square has 5% of their balance sheet in bitcoin.
Tesla has 8% of their balance sheet in bitcoin.
Microstrategy has 95%+ of their balance sheet in bitcoin.
Who is next?
— Pomp 🌪 (@APompliano) February 24, 2021
All the firms revealed the average rates at which they purchased Bitcoin. For Tesla, it was between $35,000-$40,000. MicroStrategy’s latest investment into the Bitcoin market arrived when it was trading above $52,000. Meanwhile, Square stated that it purchased the cryptocurrency at a mean price of a little over $51,000.
That also increased Bitcoin’s ability to reclaim levels above $50,000 in the coming sessions, given the corporates’ high-profile exposure in the cryptocurrency above the said levels.
Cointelegraph By Jordan Finneseth
The cryptocurrency market recovered some of the losses from the past couple of days on Feb. 25 as Bitcoin (BTC) briefly pushed back above the $50,000 level and multiple altcoins have seen double-digit price gains.
Data from Cointelegraph Markets and TradingView shows that Bitcoin bounced off a low of $45,200 late on Feb. 24 before rallying 15% to $52,000 in the morning trading session.
While the rebound in the cryptocurrency market is a welcome sight for bullish investors, Bitcoin price is still finding resistance above $50,000, and this level has yet to be confirmed as support.
Economists have also begun to worry about the rising Treasury yields, which are usually a signal of weakness for the economy and can have a large impact across many markets.
Catalysts for a $100,000 Bitcoin
Now that Bitcoin has entered a slight corrective phase, analysts are debating whether or not the digital asset will be able to surpass $100,000 by the end of 2021.
According to Giles Coghlan, chief currency analyst at HYCM, the answer to that question “depends on who you ask,” with crypto advocates feeling “very bullish” that 2021 “will be the year Bitcoin steps into the limelight,” while traditionalists remain skeptical about the “risky, unpredictable market.”
Coghlan sees the momentum behind the recent gains being driven by “the general public hype” following pro-crypto tweets from Elon Musk and Mark Cuban, but now the enthusiasm “seems to be waning” as Bitcoin struggles to hold $50,000.
Due to the volatile nature of BTC, it’s “too early to tell if this will be the new baseline support level.”
Coghlan said:
“I wouldn’t be surprised if the price slowly drops back to $40,000 USD in the coming weeks, which seems to be a more realistic level of support. A drop below this is also plausible based on how Bitcoin performed over the course of 2020.”
The analyst sees the acceptance and endorsement of Bitcoin by “large institutional funds and regulatory bodies” as the next big driver of new price highs, which would also end the domination of the crypto market by retail traders and could lead to a “less volatile” market as a result.
Announcements and protocol upgrades boost altcoin prices
Several large- and mid-cap altcoins saw their prices breakout on Thursday as recent announcements and new integrations pushed trading volumes higher.
Cardano’s ADA is the best performing coin in the top 10, currently up 10.4% and trading at $1.15, while Fantom (FTM) continues to benefit from its recent cross-chain integration with Ethereum and is up 31.79% to a price of $0.7755.
Other notable performers include Enjin Coin (ENJ), which is currently up 34% and trading at $0.6221. Polygon’s MATIC has also increased by 27.74% and trades at $0.2023.
The overall cryptocurrency market capitalization now stands at $1.533 trillion, and Bitcoin’s dominance rate is 61.3%.
Yashu Gola
Just as the GameStop Corp. (NYSE: GME) shares exploded higher in the final hours of trading on Wednesday, Jim Cramer advised the videogame retailer’s board to buy Bitcoin to increase its stock prices further.
“One last time GME,” tweeted the CNBC’s Mad Money host. “Issue one billion dollars in stock, buy one billion in bitcoin, and watch your stock go to $430.”
The statement appeared as other firms on Wall Street opted to replace a portion of their cash reserves with the benchmark cryptocurrency.
On Wednesday, Nasdaq-listed MicroStrategy revealed that it purchased $1.06 billion worth of additional bitcoins atop its 70,000-plus BTC reserves. Meanwhile, payment company Square also announced that it had added $170 million to its $50 million BTC profile on the same day.
Bitcoin rose from $3,858 to over $58,000 on booming institutional adoption against a depreciating US dollar. Source: BTCUSD on TradingView.com
Tesla, a Fortune 500 company, also invested $1.5 billion into Bitcoin to protect its reserves from the US dollar devaluation risks. The US carmaker went a step ahead by announcing that it would also start accepting the cryptocurrency for its services and products. The revelation came in early February.
Why Buy Bitcoin
Since the coronavirus pandemic began, the economic cycle came to a halt. The US government and its central bank, the Federal Reserve, responded by injecting additional US dollar liquidity into markets via banks (also known as quantitative easing), making loans affordable (cutting interest rates near zero), and providing direct aid to people (via stimulus).
The US dollar index, which measures the greenback against a basket of foreign currencies, fell by more than 12 percent due to its oversupply.
Many corporates were sitting atop huge piles of cash reserves. They did not want their dollars to get devalued due to inflation. It led them to Bitcoin, a nascent hedging asset that promises to retain its value against fiat devaluation. That became the main reason MicroStrategy, Tesla, Square, and many other firms decided to purchase the cryptocurrency.
Bitcoin surged by more than 1,200 percent from its mid-March nadir to $3,858 after the Federal Reserve’s commitment to providing infinite quantitative easing. MicroStrategy’s investment into the cryptocurrency has so far earned it twice its original input. Tesla is also sitting atop a $1 billion profit owing to Bitcoin’s parabolic uptrend.
But…
…Mr. Cramer proposed Bitcoin as a financial asset that could safeguard the so-called pandemic losers as well. His advice to the GameStop board to buy the cryptocurrency had more to do with generating adequate capital to fund its futures operations, especially as it came closer to bankruptcy last month.
The GME stock is currently in the midst of volatile price swings. On Wednesday, its value spiked by 104 percent to close at $91.71. TraderAlert data showed that the GME’s options activity also surged to its highest levels in two weeks, with bullish contracts outnumbering the bearish ones. The spike happened almost without any concrete catalyst.
GameStop stock posts a wild intraday rally without reason. Source: GME on TradingView.com
GME earlier became a central focus of a Reddit-driven buying mania launched by trader Keith Gill, also known as by his pseudonym DeepF**ingValue, in January to hurt hedge funds short on the GameStop stock. Mr. Gill doubled down on his GME investments lately by purchasing 50,000 extra shares.
The GME stock jumped 13 percent after his call. GameStop currently had about $500 million in its cash reserves as of October 31 last year.
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