In the short term, the critical tech resistance value is $ 35,500. Over the past 24 hours, Bitcoin has continuously declined at this level. When Bitcoin rose to around $ 35,500 at Binance on Jan. 13, it fell 8% shortly thereafter, indicating that there is strong selling pressure.
A pseudonymous trader named “Byzantine General” stated that Coinbase has additional sales orders in the range of $ 36,500 to $ 37,000. He said, “I still don’t take bets,” adding that he “casually buys spot dips”. There is significant uncertainty in the market because of the wide price fluctuations between $ 31,000 and $ 35,000 with no breakouts or bearish disabilities. The trader also noted that Bitcoin is currently experiencing VWAP resistance and is experiencing high selling pressure at key resistance levels.
Bitcoin (BTC) price is between $ 32,000 and $ 35,000 after the sharp drop on Jan. 12. Traders remain mixed due to various conflicting signals regarding BTC’s near-term development. Some are bullish as products quickly rebound from $ 30,500 and Grayscale reopens its products to new investors. Others are cautious due to continued opposition in the $ 35,000- $ 36,000 resistance area.
However, the general sentiment regarding Bitcoin has been increasingly positive over the past 24 hours. The rapid correction from $ 41,000 to $ 30,500 has brought many overfunded buyers and long contracts to a standstill. Before the correction, the Bitcoin futures funding rate was over 0.1% most of the time, meaning the market was significantly overfunded and mostly long.
The futures funding rate is a mechanism that balances the market by rewarding buyers when the market is mostly short and sellers when the market is mostly long. In the Bitcoin futures market, the average funding rate is 0.01%. This means that long contract holders have to pay 0.01% of their position to their counterparty short seller every eight hours. With the market overfunded for as long as the first major decline occurred, the price of Bitcoin began to decline as successive liquidations took place.
After the decline, the futures market warmed significantly less, and most derivatives normalized after an increase in interest. Although the Bitcoin futures market’s open interest still remains near its all-time high, the market is healthier than before. This increases the likelihood of another rally for the foreseeable future.
Positive macro narratives around Bitcoin
According to Ki Young Ju, CEO of the trading data platform CryptoQuant, many institutional investors have bought Bitcoin for around $ 30,000. If the price of Bitcoin fell into the support range of $ 30,000 to $ 32,000, institutions would likely protect this level with large buy orders. This is mainly why Bitcoin saw a huge reaction from buyers on Coinbase and other major US exchanges when it fell to $ 30,500 on Jan. 12. “The January 2nd Coinbase outflow was a three-year high,” wrote Ju. “Speculative guess, but if these guys are behind this bull run they’ll protect the 30k level. Even if we had a bath, it wouldn’t go below 28,000.”
Aside from the likelihood of a continued concentration of whales at $ 30,000, there are two key macro reports that could boost sentiment around Bitcoin. First, several mainstream media publications have reported that US President-elect Joe Biden is expected to appoint Gary Gensler as chairman of the Securities and Exchange Commission. Gensler previously taught a “Blockchain and Money” course, which has since been published for free on MIT OpenCourseWare. With that in mind, Mechanism Capital partner Andrew Kang said the likelihood of #BTC ETF approval has just risen significantly.
If an exchange traded Bitcoin fund were approved after years of rejection, it would result in two things. First, it would further legitimize Bitcoin as an established asset class and store of value. Second, it would allow accredited investors and institutions to invest in Bitcoin reliably. Currently, the Grayscale Bitcoin Trust and the Bitwise 10 Crypto Index Fund are some of the main institutional vehicles for investing in cryptocurrencies, including Bitcoin.
Grayscale has seen a significant increase in demand over the past few months. On January 12, Grayscale reopened its products to new investors, including investments in GBTC, after it closed in December 2020. If institutes were the main driver of the recent Bitcoin rally, new inflows into GBTC could lead to a newfound upward trend in the near term. Coincidentally, BTC was corrected relatively sharply around the time the fund closed.
For the foreseeable future, Bitcoin’s bullish and bearish scenarios will revolve around two key levels: $ 30,000 and $ 35,500. As long as Bitcoin maintains $ 30,000 as a strong support area, the likelihood of an outbreak rises above $ 35,500. A clean move above $ 35,500 would likely mean the rally would continue, which could lead to a new uptrend beyond the current all-time high.
Traders and technical analysts say Bitcoin’s current price movement is pretty similar, when Bitcoin fell to around $ 16,000 in late November 2020. At this point, Bitcoin consolidated for two weeks before it finally broke out and rose to $ 20,000. BTC price could see a similar trend, bouncing off the $ 30,000 support and trying to break the $ 35,500-36,000 resistance range in the short term.
A pseudonymous trader named “Neko” said Bitcoin’s recovery so far has been encouraging. He anticipates BTC will soon retest $ 36,000, which would open the way for a potential rally to an all-time high of over $ 42,000: “Very impressive buybacks shown. I really like these wicks on the bottom of these h4 candles. I think we have found the local soil for now. “
Another variable to be taken into account in the short term is that the so-called “kimchi premium” is starting to decline in South Korea. When Bitcoin recorded a trade for $ 40,000, the premium was consistently above 5%. Since the decline, the premium has been between 2% and 3%. This could indicate that retail demand for cryptocurrencies in the South Korean market has cooled slightly after the correction.
Bitcoin also traded lower on Coinbase, which is unusual as it was consistently higher than Binance throughout the rally. Coinbase also has a higher BTC price than other major exchanges that use Tether (USDT), of course, due to the small difference between Tether and the US dollar in the exchange market. Ideally, the premium would have to return on both the South Korean exchanges and Coinbase for the bull trend to resume.