Bitcoin (BTC) price rebounded last week, climbing nearly 6.5% since October 2. The resilience of the dominant cryptocurrency has pleasantly surprised traders, and many analysts are expecting a further decline. After BTC returned from a critical support level above $ 10,500 to just over $ 11,000, the sentiment turned optimistic.
In the short term, traders believe that the $ 10,500 level remains the most important level for Bitcoin for many reasons. In particular, it represents a historically significant support level in both the continuous and the previous price cycle. Throughout 2019, BTC consistently exceeded $ 10,500 and was then brutally rejected. Given that the $ 10,500 level has been tough resistance in the past, this is a strong support level.
Whale clusters or bubbles also show that $ 10,500 protection is essential for Bitcoin to maintain its momentum. The whale groups tracked by the Whalemap researchers form when whales buy bitcoin at a certain level. More recently, the whale population has ranged from $ 10,407 to $ 10,570, which means whales can gather. Since whales tend to trade for a longer period of time, there is a good chance that the $ 10,570 area will remain a strong support level.
Over the medium term, traders expect $ 13,000 to be a major hurdle before Bitcoin sees an extended rally. According to a pseudonym trader known as Salsa Tequila, past macroeconomic changes indicate that $ 13,000 is an obstacle to record highs. If BTC continues to stabilize and consolidate above key support levels, the trader said there could be a new record meeting in the long term.
The biggest issue is whether Bitcoin can stay above $ 10,500 and ultimately $ 11,000 to test $ 13,000. Between the first five days of October, various negative macroeconomic factors slowed down Bitcoin’s growth. Since then, especially after Square’s significant investment in Bitcoin, the leading cryptocurrency has rebounded. In the fourth quarter, the bullish scenario depends on the strength of BTC above $ 10,500 and whether it can exceed $ 11,000.
Why did bitcoin fall in October?
In the first week of October, Bitcoin faced several threats that could escalate into possible Black Swan events. On October 1, the US Commodities and Futures Trading Commission and the Justice Department filed charges against BitMEX and its management. They argued that BitMEX had violated bank secrecy laws and that BitMEX technical lead Samuel Reid was arrested in Massachusetts. After the Justice Department issued a public arrest statement, Bitcoin fell 5% over the next 48 hours.
On October 2, US President Donald Trump confirmed on Twitter that he has a contract with COVID-19. The news quickly shook financial markets, causing stocks to plunge and bitcoins to fall gradually. Over the course of two days, BTC faced two unexpected macro events that significantly reduced momentum as it rallied above $ 10,900. If these two incidents hadn’t happened, I would probably have revisited the $ 11,000 resistance level.
Now, a week later, Bitcoin has rebounded from the price level as news from BitMEX and Trump surfaced. BTC’s resilience in the face of two events that likely caused the markets to plummet further is encouraging.
Bitcoin recovery factors
There are several key factors that have helped Bitcoin bounce back from its initial fall of less than $ 10,500. First, the US dollar has dropped over the past 14 days, indirectly triggering the rise in bitcoin and gold. Second, the news of Square’s $ 50 million purchase of Bitcoin raised public opinion. Third, some analysts reported that Bitcoin was bullish prior to the Square news release, with a favorable technical structure.
When large decentralized economic tokens were withdrawn, it caused market turmoil. BTC’s short-term recovery is positive, according to Light, a pseudonym options and futures trader. In the short term, the trader suggested that a trend is more likely than a crash. “Bitcoin $ BTC was already upbeat in front of Square News, as the offer did not sell until the bottom of this trendline, although YFI $ was trying to fully push the kamikaze into the market. It is clear what will happen next. ”
Compared to MicroStrategy’s combined $ 425 million purchase of Bitcoin, the $ 50 million investment is not large enough to simply cause a surge in Bitcoin. While Square is a $ 81 billion conglomerate and $ 50 million is a good investment, it doesn’t take much effort, although the implications were significant.