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Crypto traders cautious on Bitcoin price as rally to $11.7K goes sour

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After the price of Bitcoin (BTC) achieved $11,720 on Binance, traders began to turn slightly skeptical on the dominant cryptocurrency. Despite the initial breakout above two key resistance levels at $11,300 and $11,500, BTC recorded several rejections. While it might be premature to predict a marketwide correction, the level of uncertainty in the market seems to be rising.

In the short term, traders pinpoint the $11,200 to $11,325 range as a critical support area. If that region holds, technical analysts believe a significant price drop is unlikely. But if Bitcoin demonstrates weakening momentum below $11,300, the market would likely become vulnerable. Although the technical momentum of BTC has been declining, traders generally see a bigger support range from $10,600 to $10,900.

Considering the array of positive events that buoyed the price of Bitcoin in recent weeks, a near-term pullback could be healthy. On Oct. 8, Square announced that it purchased $50 million worth of BTC, reportedly 1% of its assets. Then, on Oct. 13, it was reported that Stone Ridge, the $10 billion asset manager, invested $115 million in Bitcoin. The market sentiment is highly optimistic as a result, and a sell-off to neutralize market sentiment could be positive.

Traders expect a consolidation period

Cryptocurrency traders and technical analysts are cautious in the short term, but not bearish enough to predict a clear top. Bitcoin has been ranging below $11,500, but it has also risen 5% month-to-date from $10,800. At the monthly peak, BTC recorded an 8% gain, which is relatively high considering the short period. As such, while the momentum of Bitcoin has dropped off in the past 36 hours, it is difficult to forecast a major pullback.

Michael van de Poppe, a full-time trader at the Amsterdam Stock Exchange, sees a healthy ongoing trend in the broader cryptocurrency market. The trader pinpointed that BTC could see a drop to the $10,600 to $10,900 support range, but the combined market cap of cryptocurrencies is clearly on track for an extended upwards rally, he said, adding: “Very healthy construction going on here. A higher-high made after a higher low was created. Just another range-bound period before breakout above $400 billion. The next target zones are $500 and $600 after that. But very healthy upwards trend.”

Edward Morra, a Bitcoin technical analyst, cited three reasons for a pullback to the $11,100 level, noting that BTC hit an important “daily supply” level when it rallied to $11,700. This means there was significant liquidity, which was also a heavy resistance level. Morra also said the 0.705 Fibonacci resistance and the “R1 weekly pivot” make a drop to $11,100 more likely in the near term.

A pseudonymous trader known as “Bitcoin Jack,” who accurately predicted the $3,600 bottom in March 2020, believes that while the current trend is not bearish, it’s not primed for a continuation either. BTC rejected the $11,500 to $11,700 range and has been trading under $11,400. He said that he would likely add to his positions once an upward price movement becomes more probable. The trader added: “Been reducing some on bounces — not too convinced after the two rejections on the two lines above price. Will add again as continuation becomes more likely.”

Although traders seemingly foresee a minor price drop in the short term, many analysts are refraining from anticipating a full-blown bearish rejection. The cautious stance of most traders is likely the result of two factors that have been consistently emphasized by analysts since September: BTC’s strong 15.5% recovery within merely 19 days and little resistance above $13,000.

Resistance above $13,000

Technically, there is no strong resistance between $13,000 and $16,500. Because Bitcoin’s upswing in December 2017 was so quick and strong, it did not leave many levels that could act as resistance. Hence, if BTC surpasses $13,000 and consolidates above, it would raise the probability of a retest of $16,500, and possibly the record high at $20,000. Whether that would happen in the medium term by the end of 2021 remains unclear.

“Byzantine General,” a pseudonymous trader, said $12,000 is a critical level. A rapid upsurge above the $12,000 to $13,000 range could leave BTC en route to $16,500 and ultimately to its all-time high. The analyst said: “Volume profile based on on-chain analysis. 12K is such an important level. It’s pretty much the only resistance left. After that it’s clear skies with only a minor speed bump at 16.5K.”

Cathie Wood, the CEO of Ark Invest — which manages over $11 billion in assets under management — also pinpointed the $13,000 level as the most important technical level for Bitcoin. As previously reported, Wood said that “in technical terms,” there is little resistance between $13,000 and $20,000. It remains unclear whether BTC can regain the momentum for a rally above $13,000 in the short term, leaving traders cautious in the near term but not strongly bearish.

Variables to sustain the momentum

Various on-chain indicators and fundamental factors, such as HODLer growth, hash rate and Bitcoin exchange reserves indicate a strong uptrend. On top of that, according to data from Santiment, developer activity of the Bitcoin blockchain protocol has continuously increased: “BTC Github submission rate by its team of developers has been spiking to all-time high levels in October. This is a great sign that Bitcoin’s team continues to strive toward higher efficiency and performance going forward.”

There is a possibility that the optimistic fundamental and favorable macro factors could offset any technical weakness in the short term. For alternative assets and stores of value, like Bitcoin and gold, inflation and negative interest rates are considered persistent catalysts. The United States Federal Reserve has emphasized its stance on retaining low interest rates for years to come to offset the pandemic’s effect on the economy. Recent reports indicate that other central banks might follow suit, including the Bank of England as it’s deputy governor Sam Woods issued a letter, requesting a public consultation, that reads:

“We are requesting specific information about your firm’s current readiness to deal with a zero Bank Rate, a negative Bank Rate, or a tiered system of reserves remuneration – and the steps that you would need to take to prepare for the implementation of these.”

In the medium term, the combination of positive on-chain data points and the uncertainty surrounding interest rates could continue to fuel Bitcoin, gold, and other safe-haven assets. That could coincide with the post-halving cycle of Bitcoin as it enters 2021, which historically caused BTC to rally to new record highs. This time, the market is buoyed by the entrance of institutional investors as evidenced by the high volume of institution-tailored platforms.





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China’s central bank lays regulatory foundation for CBDC

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China’s central bank, the People’s Bank of China (PBOC), published a draft law this Friday that aims to provide regulatory framework and legitimacy for a forthcoming central bank digital currency (CBDC), the digital yuan. 

The draft law states that the yuan is the official currency of the People’s Republic of China whether in physical or digital form.

The draft law also appears to take aim at third-party efforts at yuan-backed digital currencies, stating that individuals and institutions are prohibited from making and issuing a currency designed to “replace” digital yuan circulation. This move would presumably criminalize all non-state-sanctioned yuan-backed stablecoins. 

The punitive measures against violators of this proposed law are harsh: most notably confiscating all profits, destroying all tokens, and imposing a fine of not less than five times the illegal amount created, in addition to the possibility of criminal prosecution and imprisonment.

The People’s Bank of China clarified that the draft of the new law is on the table for public consultation until November 23, 2020.

Previous reports have indicated that China hopes to start officially issuing the digital yuan before the Winter Olympics in Beijing in February 2022. Additionally, earlier this month, China conducted a major test of Shenzhen’s digital yuan payment system, where nearly 47,500 residents claimed 200 yuan ($30) each in digital currency which they then spent across 3,389 stores throughout the city.

This regulatory move is also just the latest in a worldwide trend towards CBDCs. The Bank for International Settlements had told Cointelegraph that it had worked with seven central banks to define the foundational principles necessary for any publicly available CBDCs to help central banks meet their public policy objectives.



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Bitcoin Must Consolidate Above This Key Level, Or Risk Plunging to $11,900

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  • It has been a wild past few days for Bitcoin and the aggregated cryptocurrency market
  • Bitcoin has been able to post consistent gains throughout as of late, with buyers and sellers largely reaching an impasse following its slight rejection at $13,200
  • This has created a slight consolidation phase around $13,000 that it has been caught within throughout the past two days
  • If this phase persists in the near-term, BTC must continue holding above $12,800
  • One analyst noted that a break below this level could open the gates for a move down to lows of $11,900

Bitcoin and the aggregated cryptocurrency market have seen a roller-coaster week, with Bitcoin’s previous weakness being fully erased by bulls who sent it surging to fresh yearly highs of $13,200.

This move’s intensity has sparked a sense of euphoria and hope amongst traders and investors, with may expecting further upside in the days and weeks ahead.

For this to come to fruition, bulls must continue defending against a break below $12,800.

One analyst noted that a break below this level could open the gates for BTC to see a sharp decline down towards $11,900.

Bitcoin Struggles to Gain Momentum as Selling Pressure Mounts 

On a short-term scale, Bitcoin’s momentum is faltering slightly due to some heavy selling pressure within the lower-$13,000 region.

Until it can break above this region, there’s a possibility that a retrace could be imminent in the near-term.

At the time of writing, Bitcoin is trading flat at its current price of $12,985. This is around the price at which it has been trading for the past couple of days.

Each selloff has been aggressively absorbed by bulls, which is a positive sign.

Analyst: Here’s the Crucial Defense BTC Needs to Defend

While sharing his thoughts on Bitcoin’s present technical outlook, a popular crypto-focused analyst and trader at the Amsterdam Stock Exchange noted that $12,800 is the key support level to watch in the near-term.

He contends that a defense of this level could lead BTC towards $13,500, whereas a rejection could cause it to drop towards $11,900.

“Bitcoin: As long as $12,750-12,800 holds, I think $13,500 is next. But if it doesn’t hold as a pivot, I assume the price drops further down toward $12,200 and potentially $11,900.”

Image Courtesy of Crypto Michael. Source: BTCUSD on TradingView.

How the entire market trends in the months ahead will depend on Bitcoin. This makes it vital for BTC and altcoins investors alike that the benchmark crypto maintains its newfound momentum.

Featured image from Unsplash.
Charts from TradingView.





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Top traders say Bitcoin log chart points to a 2017-style BTC bull run

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Peter Brandt, a well-regarded veteran trader, recently emphasized the high demand from institutions as a key catalyst for Bitcoin’s strong performance.

BTC/USD 1-month chart. Source: TradingView

The strong high time frame technical structure of BTC, especially the weekly chart, and the strengthening fundamentals are buoying the market sentiment. In a tweet, Brandt posted the above chart and said:

“Bitcoin—IF the current gains hold through end of Oct—is poised for the second-highest monthly close ever. $BTC Institutions are increasingly involved in Bitcoin ownership. Institutions mark the value of their assets monthly.”

In addition to the rise in trading volume and growing institutional appetite, investors are referring to the logarithmic chart to forecast a broader rally.

Raoul Pal focuses on the Bitcoin log chart

The log price chart is the most widely used scale by most technical analysts. A logarithmic chart simply means a chart that represents common percent changes with equal spacing in a scale.

Raoul Pal, the founder and CEO of Real Vision Group, says Bitcoin’s monthly log chart is highly optimistic. He wrote:

“Its a bitcoin kind of day. The monthly log chart with regression lines is really something to behold. One of the nicest, post powerful chart patterns I’ve ever seen.”

The technical reason behind the optimism towards the monthly log chart is mainly its clean breakout. Throughout the past four years, $13,000 has acted as a heavy resistance level.

The historical log chart of Bitcoin. Source: Raoul Pal

As such, on high time frame charts, like the weekly and the monthly chart, BTC always closed below $11,000, except for 2020.

Bitcoin’s clean technical breakout on the monthly timeframe is leading traders and investors like Brandt and Pal to make strong bullish calls on BTC’s price action. As Pal said, “if history rhymes, 2021 is going to be a BIG year.”

BTC/USD 1-month chart. Source: TradingView.com

Q4 2020 may end on a positive note

Apart from the numerous bullish technical and fundamental catalysts, the timing of the current rally is also in favor of a major Bitcoin bull cycle.

Bitcoin quarterly returns in percentage. Source: Skew

According to data from Skew, Bitcoin had not had three positive consecutive quarters since 2017. During that year, BTC reached its all-time high at $20,000 following its second block reward halving in 2016.

Bitcoin could possibly be on track to record a massively positive gain in the fourth quarter if it stays above $12,000. If so, that could lead to the same bull cycle pattern as 2017. Next year would also present the same post-halving cycle BTC saw in 2017, which further strengthens the narrative of a newfound bull cycle.