The price of Bitcoin (BTC) reached a new record above $ 42,000 on January 8, rising 9% in just three hours. At the time, there was a high premium at Coinbase, which meant that US buyers boosted the market by aggressively accumulating BTC. However, there is continued selling pressure coming from Asia, mainly from South Korea.
Bitcoin was corrected drastically after rising to $ 42,000, dropping more than 7% in about eight hours. The settlement coincided with significant whale activity on the main exchanges. Trading activity in the altcoin futures market also demonstrated a similar trend. For example, on January 9, a whale discharged a large part of Ether (ETH) is bought on Bitfinex, making a profit for the first time since March 12.
Whales have been selling in large scale since the beginning of 2021. For example, when Bitcoin exceeded $ 40,000, the big whales started selling BTC even as the price dropped to less than $ 40,000. In three hours, on January 7, Binance’s so-called “megabaleias” sold a total of four times, generating extreme volatility.
Where does Bitcoin go next?
Currently, the Bitcoin market is essentially seeing a battle between whales making a profit on their positions and new buyers in the U.S. market accumulating BTC. As such, there has been consistent extreme volatility since Bitcoin exceeded $ 30,000. Due to the high capital inflow into Bitcoin through Coinbase, BTC’s bullish momentum is likely to be sustained in the foreseeable future.
The main metrics to watch for are Coinbase’s Bitcoin outflows and stablecoin inflows on major exchanges. When high net worth investors buy Bitcoin, they prefer to withdraw BTC from centralized exchanges for security purposes. Consequently, high flows of Coinbase would mean a large accumulation of BTC in the United States.
When the inflows of stablecoin are high, this suggests that marginalized capital is returning to the Bitcoin market. Instead of withdrawing in fiat currencies, such as the US dollar, cryptocurrency exchange market traders, especially derivatives traders, park their funds in stable currencies. Therefore, if the capital stored in stablecoins starts to switch back to cryptocurrencies, this usually suggests a bullish market structure.
Generally, the market sentiment around Bitcoin remains positive, despite an increase in the past three months. Eric Wall, chief investment officer at Arcane Research, said in a tweet that Bitcoin has the potential to see a “very extreme peak” this time around. This would mean that even if Bitcoin could be overheated based on technical indicators in the short term, BTC could still have room for further growth.
At the current price of around $ 40,000, Bitcoin’s market capitalization is valued at more than $ 740 billion. Given the $ 9 trillion valuation of gold, this would place BTC’s market capitalization at around 8.2% of the gold. Bullish Bitcoin projections, like the Winklevoss twins thesis, anticipate that Bitcoin will overtake gold in the long run. Based on this assessment, some analysts say that Bitcoin that reaches 10% to 20% of the market value of gold is realistic.
Wall noted that Bitcoin would likely peak when there was a large amount of “foam” on the market. If there is an unusually high level of retail enthusiasm around Bitcoin, the likelihood of a temporary Bitcoin top will increase. However, Wall said that, given the unprecedented level of institutional interest in Bitcoin, the next top could be much higher than many realize:
“The reason is because our current macroeconomic climate is unprecedented – our economy is being flooded with money. In addition, we have just witnessed an unbelievable level of endorsement by the financial elite in favor of Bitcoin. And we know that this time the price is being driven by institutions and retail at the same time now. “
What are the main technical levels to be observed?
According to researchers at Whalemap, a data analysis platform that tracks Bitcoin whales or high net worth investors, there are two main technical levels for Bitcoin in the short term. As long as the BTC remains above $ 38,719 and $ 38,700, which are the two main areas for whale clusters, the researchers said the BTC upward trend remains intact.
Whale clusters form when whales accumulate Bitcoin at a certain price point and do not move their goods later. Clusters are theoretically ideal support areas because whales would seek to accumulate more at the levels they bought BTC previously if Bitcoin’s price falls. The researchers noticed: “Support of $ 39,719, invalidation below $ 38,700. Support gap between $ 39,719 and $ 32,180, so consolidation in the bearish zone could lead to $ 32,000. “
On January 9, Bitcoin’s price fell to $ 38,700, recovering strongly at the support level. This indicates that some whales are accumulating at this level, protecting it as a short-term support area to keep the BTC rally moving.
However, Raoul Pal, CEO of Real Vision Group, warned of “New Year’s head fake”. Pal said hedge funds started talking about several risky assets earlier in the year. So, when many investors buy, the market tends to correct at the end of the first quarter. If this false-head phenomenon coincides with a rising US dollar, Pal said he would be tempted to place S&P 500 put options. In the options market, put options are short contracts that allow investors to bet against an asset or index.
Considering that Bitcoin and gold tend to move together, and a rising dollar can negatively affect both assets, a New Year’s head counterfeiting can cause corrections in the Bitcoin and gold markets. Whether this correction would be as brutal as the March crash remains uncertain, but given that the BTC is overbought on higher terms, such as the weekly and monthly charts, there is a possibility of a deep correction.