The price of Bitcoin (BTC) is showing signs of a further recovery by breaking the $ 40,000 resistance area. There is a combination of optimistic on-chain data points and a favorable market structure that is leading analysts and traders to anticipate an imminent Bitcoin disruption to a new historic record.
In the short term, the $ 38,000 and $ 40,000 levels remain the biggest obstacles for Bitcoin. The longer it took BTC to get out of $ 40,000, the more likely a potential correction was imminent. Therefore, it is critical for Bitcoin to exceed the $ 40,000 level and stay above it in the near future. Bitcoin has already spent nearly three weeks below $ 38,000, causing its short-term price cycle to stall and lose momentum. On February 6, Bitcoin finally surpassed the $ 38,000 level, establishing it as a support level.
A positive data in the chain that increases the chances of a Bitcoin escape is the increase in whale addresses. Santiment Analysts said that Bitcoin whales continued to accumulate despite the increase in the asset price: “#Bitcoin whales (more than 1,000 $ BTC addresses) have not stopped accumulating, while mid-level traders (10-1,000 $ BTC) to did not stop profiting from the price hovering around $ 38,000. Meanwhile, the small addresses have # FOMO coming back quickly! “
The accumulation of Bitcoin by whales coincides with large outflows from Coinbase, which usually indicates that investors with high net worth are buying Bitcoin. A trader with a pseudonym on Twitter known as Johnny stated: “It is a coincidence that we have seen large amounts of $ BTC being withdrawn from the coinbase. The first market correction of the 2021 bull market is complete. “
Scott Melker, a cryptocurrency trader, noticed that on optimistic data and on-chain fundamentals, Bitcoin is demonstrating a favorable technical market structure. He explained that Bitcoin is seeing a “massive high flag” structure, which, when played, could lead BTC to reach $ 63,000 in the foreseeable future: “$ BTC is potentially coming out of a huge high flag that would technically send the price to $ 63,000, ”Expressing optimism about Bitcoin’s short-term price cycle.
What about Bitcoin in the short term?
Speaking to Cointelegraph, Guy Hirsch, managing director of the social trading platform eToro for the U.S., said there is an ongoing capital rotation from Bitcoin to decentralized finance and other altcoins. The market has become totally risky, as DeFi-related tokens increase from 30% to 100% in a single day. The appetite for altcoins, which are seen as high-risk, high-return bets, has slowed Bitcoin’s pace down.
Hirsch noted, however, that the long-term sentiment for Bitcoin is still optimistic. He explained that Bitcoin was limited by a range for a while, which means it was being traded in a restricted range. That would change if the price of Bitcoin was guaranteed at more than $ 40,000, said Hirsch, as this would cause interest in Bitcoin to increase in a short period. Based on data from the options market, Hirsch said there are many open contracts of $ 52,000 and $ 56,000, which Bitcoin can address next. He added:
“I would be surprised if Bitcoin does not exceed $ 40,000 in the next few months. In fact, there is no support level established at this price because it is only traded there for a brief period. However, positioning options can be a good place to look when trying to find some insights into where professional traders see markets moving. “
Bitcoin has stagnated over the past week, as the decentralized financial market has outpaced major cryptocurrencies, including Bitcoin and Ether (ETH). Hirsch said that many investors, including institutions, saw opportunities for higher-earning games in the DeFi market. Consequently, he said that Bitcoin’s profits spun in altcoins, leading to an “alternative season”. However, in the long run, Hirsch thinks profits would likely return to Bitcoin, explaining:
“This capital rotation, generally called the ‘alternative season’, is common in the wake of Bitcoin reaching new highs and is usually followed by a liquidation of these assets back to BTC. In the short term, sentiment is neutral, and this can be seen in the more limited Bitcoin trades lately; but the long-term sentiment is still bullish, as evidenced by PayPal’s admission during this week’s earnings conference call, that they were surprised by the amount of crypto-asset transactions on its platform.
Strategists predict a clean profit of $ 40,000
Investors, researchers and strategists from Bequant, Lmax Digital and CrossTower told Cointelegraph that they expect Bitcoin to likely exceed $ 40,000, as well as the explosive increase in demand in December 2020. They believe that the recent consolidation of Bitcoin shows no weakness. in its trend price.
Denis Vinokourov, head of research at the Bequant crypto trading and brokerage platform, said that BTC staying below $ 38,000 for an extended period showed “efficient price discovery”, which in the past led to a “sharp reversal due to lack of price information “. In addition, he added that once the $ 40,000 level is broken, what happens next will be difficult to predict:
“There is little information to continue, since the previous maxims are the natural level of initiation. But after that, anything goes, and the next step is unknown. “
Chad Steinglass, head of trading at the crypto investment platform CrossTower, said that after Bitcoin exceeds $ 40,000, it will see an explosive bullish move. Bitcoin saw a similar scenario happen in December 2020, when it struggled to break the $ 30,000. As soon as he did, he saw a fairly rapid move towards his highest record of $ 42,000. According to him:
“If the new investment demand can destroy this wall of selling interest, and Bitcoin breaks 40K again, and especially if it reaches new historical highs, I hope that the volume of these risk-reduction sellers will evaporate quickly, and that could pave the way for another taller leg. “
Joel Kruger, a cryptocurrency strategist at Lmax Digital, a cryptocurrency company, believes that Bitcoin could reach the $ 40,000 level, which would present a more “significant” area of resistance. He noted that “the current price action is indicative of consolidation after a significant rise”, emphasizing that the consolidation was healthy for Bitcoin.
However, he was more cautious in predicting a continued upward movement for Bitcoin after breaking the $ 40,000 mark, saying that “we do not believe the market should expect a significant upward continuation beyond $ 40,000 yet.” According to him, the “weekly and monthly technical studies are still in strong overbought territory”, which suggests that BTC is entering risk territory.