Bitcoin (BTC) price has been hovering between $ 9,800 and $ 10,500 for almost a week after falling from $ 12,100 on September 12. While BTC is struggling to show any significant price movement, traders are generally cautious.
In the medium and long term, traders expect Bitcoin to recover and see the ongoing consolidation phase as a healthy retreat. From July 16 to August 17 Bitcoin rose at Coinbase from USD 9,005 to USD 12,486, although a withdrawal is probably necessary to neutralize the futures market.
A large part of the daily Bitcoin volume comes from the futures market. Cryptocurrency futures exchanges use a mechanism called “funding” to balance the Bitcoin market. The mechanism obliges long or long contract holders to briefly or briefly compensate sellers for part of their positions when the market is largely long, and vice versa.
Usually When the Bitcoin rally is overloaded, the futures market crosses and funding rates skyrocket. In the event of a withdrawal, funding rates can stabilize, reducing the likelihood of a short-term or long-term contraction.
Short-term Bitcoin decline explained
Dennis Vinokourov, head of research at crypto-exchange and institutional brokerage provider BeQuant, and Guy Hirsch, CEO of the trading and brokerage platform eToro, showed in an interview with Cointelegraph that the medium-term outlook for Bitcoin is positive due to various fundamental and technical factors .
After rejecting Bitcoin at $ 12,000, analysts attributed many factors to the BTC crash. As Vinokourov noted: “The aggressive development of the locked cryptocurrency position related to DeFi assets“could have contributed to the decline. Other factors such as the whales ‘profits, miners’ sales of their reserves and a major South Korean exchange, Bithumb, which reportedly had a police raid, could all have put selling pressure on Bitcoin. Hirsch emphasized that in times of low volatility, the price declines can intensify when there are fewer traders in the market:
“Mining pools move higher than usual on exchanges to cover their overheads, and investors have been more reluctant lately (even for the usual summer truce). Lower amounts mean volatility and investment price cuts can be more drastic than normally during heavier ones Trading sessions. “
Vinokuorov stated that the decline could benefit Bitcoin in the coming months as the price denial is not a negative move if it calms the market down. He also noted that traders’ leverage and speculative flow would converge after a period of consolidation:
“The price discovery and consolidation after a strong rally is an indication of healthy market flow in both directions. Rejection of prices is not necessarily a bad event as it allows market participants to take stock of the situation and seek to serve the interests of both parties the leveraged / speculative flow as well as the long-term owner. “
The long-term outlook for Bitcoin
Looking to the fourth quarter of 2020 Analysts remain neutral or bullish about Bitcoin price action, and a plethora of technical and fundamental factors could keep sentiment in the BTC firm from November to December. Historically, BTC has had a strong performance in the last two months of the year. BTC in particular hit a new all-time high in December 2017.
Possible technical catalysts include closing the monthly Bitcoin candle above $ 11,600 for the first time since 2017 and hitting the resistance level of $ 12,000. In short, it was a big breakout after falling to a low of $ 3,596 on BitMEX in March 2020.
Fundamental factors that could contribute to Bitcoin’s uptrend are the strengthening of infrastructure, rising inflation and interest rates close to zero. A low interest rate environment drives the bullish argument for gold, and possibly Bitcoin, as it could lower the value of the US dollar. Hirsch said:
“I think this bearish sentiment is short-term, and there are some positive developments that support BTC’s continued growth, such as the Fed’s policy to keep interest rates near zero for a sizable future.”
He added that a collapse of Bitcoin is possible in the short term if Bitcoin’s perception as a hedge against inflation improves. Last month, public corporations and institutional investors bought billions in Bitcoin. MicroStrategy, a publicly traded company in the United States, invested $ 250 million in BTC as the main part of the company.
Due to the growing demand for Bitcoin as a possible hedge against inflation as well as the tone around BTC prescribed by Wall Street giants such as Paul Tudor Jones, Hirsch believes another big increase is possible: “The Federal Reserve’s attempt to prop up the economy could lead investors to take a closer look at Bitcoin for a number of reasons, causing a positive rally for the largest digital asset.“.
BTC enters uncertainty
In the short term, technical analysts continue to disagree on Bitcoin price action, although they agree that Bitcoin price movement will slow down. An anonymous trader named “Bitcoin Jack” said that Bitcoin could be in a descending wedge that has a 50% chance of breaking or falling: “BTC is testing the 128 DMA – historically often a support / resistance level at the trending price. Also test the HTF support – LTF has not yet convinced me. If the LTF can show strength, I want more time“.
The short-term bullish bitcoin scenario would re-test the resistance level of $ 11,000 based on the graph above. A bearish scenario would cause another drop to $ 9,000 and BTC could potentially lead to a CME gap of $ 9,650 that has yet to be closed.
Since bitcoin whales frequently mark the top and bottom of BTC, there is a strong chance BTC will drop to $ 8,800, which has been identified as the buying area for them. An anonymous trader recognized as “Salsa Tekila” said: “If BTC fell 30 to 45 percent from the top like it did in 2017 (past performance doesn’t predict the future), we would need $ 6,850 to $ 8,650. “.
However, Hirsch said Bitcoin rallied in earlier market cycles in early November, ahead of the major holidays in Asia: “We’ve seen these spikes multiple times, so I wouldn’t be surprised if Bitcoin spikes again this year.In addition, Vinokourov believes that Bitcoin could soon retest the $ 12,000 mark as “the number of bitcoins locked on Ethereum continued to increase, even though the total amount locked across the ecosystem decreased”..