Bitcoin (BTC) price hit a new all-time high on February 11 as it topped $ 48,500 on major exchanges. Since then, the dominant cryptocurrency has consolidated and is showing no real momentum to break out of record high in the near future. However, analysts are not impressed with the consolidation after breaking a new high.
In general, market commentators say that an asset that is moving slowly or consolidating after an explosive upward move is a sign of a healthy market. For Bitcoin, stabilizing after a strong momentum rally to a record high at this point in time due to the overcrowded futures market is vital. If the price of Bitcoin continued to rise without a proper reset pullback, it would increase the likelihood of a larger long squeeze in the short term.
There is long pressure on the futures market when the market is overwhelmed with buyers or long contracts and the financing rate develops very positively as a result. When the funding rate is above 0%, buyers must 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 equilibrium in the market so that the market does not fluctuate sideways over a longer period of time.
Given the negative impact of an imbalance in the futures market and the fact that the Bitcoin futures funding rate is consistently above 0.1%, which is ten times the normal 0.01%, longer consolidation is optimistic for Bitcoin. This is given, however, as BTC remains above the critical support areas which appear to have been set at $ 44,214 and act as a critical support level for whale clusters in the short term.
Where is Bitcoin going next?
In an interview with Cointelegraph, Guy Hirsch, US CEO at eToro, emphasized that the $ 1.5 billion purchase of BTC was taking the market by storm. The news caused a significant shift in sentiment, leading many investors to view this as a turning point in the history of the crypto market and the perception of crypto assets by public companies. The news also broke when MicroStrategy held a seminar with over 1,400 companies to discuss Bitcoin.
Hirsch stated that the synergy between Tesla’s acquisition of Bitcoin and MicroStrategy, which continues to raise awareness of the merits of BTC as a store of value and a business investment, would lead more public corporations to pursue similar announcements. In that case, Hirsch stressed that a push towards $ 50,000 was plausible before the end of the second quarter, adding:
“We will likely look back on MicroStrategy and Tesla who are at the forefront of this new way of using corporate treasury assets to appreciate, rather than just sit on, cash, as a turning point in not just Bitcoin history. but also how listed companies act and serve in the best interests of their shareholders. “
Traders are also generally optimistic about the short and medium term development of the Bitcoin price. A pseudonymous trader named Loma said the “relative disadvantage of BTC is so small at the moment” given the strong market sentiment. The trader noted that “$ 50,000 is inevitable” and whether BTC falls “a little bit before” is not a major issue.
A “black swan” event could theoretically lead to a correction of the Bitcoin price by 30 to 40%, as has been seen in the past bull cycles. However, Bitcoin is seeing unprecedented buyer demand from wealthy investors and institutions that have not been as active in recent years.
The influx of new institutional investors is an important variable that could drive BTC’s momentum towards $ 50,000 to $ 70,000. The steady rise in liquidity in the traditional financial market continues to catalyze the appetite for inflation hedging assets like Bitcoin and gold.
A potentially bearish case for BTC
A crypto whale named Waro said there is a scenario where Bitcoin could see a possible retreat in the short term. The trader said that if BTC struggles to break out of $ 48,000, its momentum could weaken and it could see a 5-15% decline for 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 ask for 52,000 about a week ago and now everyone is euphoric and screaming for 50+, while Bitcoin has problems with this resistance. No bear, it just needs more fuel, that’s all. “
A fundamental factor that could counter a potentially bearish market sentiment around Bitcoin is the decreasing selling pressure from miners. In the past two weeks, miners have been selling large amounts of BTC, which has put pressure on the short-term price movement of Bitcoin. With miners being one of the few external sources of selling pressure in the cryptocurrency market, increased sales activity can stifle Bitcoin’s uptrend.
Lex Moskovski, a cryptocurrency investor and quant trader, noted that miners “have not been as eager to sell their #Bitcoin in the past two weeks”. He said that either miners expect the price of Bitcoin to rise significantly in the foreseeable future, or that BTC can no longer be sold in the near future.
Either way, this trend is a positive catalyst for Bitcoin that could counter the bear market in the crypto market and push BTC to a new all-time high above $ 50,000.