Bitcoin (BTC) is up 36% in the last 35 days, showing a strong rally. The market sentiment was optimistic due to increased institutional demand and the perception of Bitcoin as a hedge against inflation.
But after the big boom, the belief began that Bitcoin could withdraw. While a slight correction may occur, such as a 4% drop to just under $ 13,000 on October 28, a major downtrend is still unlikely. Bitcoin was valued at $ 13,860 at today’s peak, the height of the July 2019 rally. After reaching this resistance zone, a small pullback is expected. After falling below $ 13,000, BTC is quickly back at $ 13,150, which has shown resilience.
Over the past 11 years, Bitcoin’s price has changed periodically. One of the most famous stories, among many others, is the halving of the block reward, as every four years the Bitcoin blockchain halves the amount of Bitcoin extracted. Halving slows down the speed at which a new BTC is created, thereby reducing the total amount in circulation over time. The following year, after every half, BTC grew strongly, which was seen in December 2017 when BTC reached $ 20,000 after cutting it in half in July 2016.
According to an analyst known as Seteris Paribus, Bitcoin will likely hit $ 20,000 in March 2021, if a similar pattern occurs. For $ BTC to match the time of the last cycle, to maximize its historical date, it should hit $ 20,000 on March 11, 2021. It would be hairy if this happened a year later (without a doubt) the most famous day. In the history of Bitcoin. … ”
Consequently, analysts expect that the road to $ 20,000 in the medium term will face minor hurdles and reforms. But three reasons could prevent Bitcoin from seeing a major downturn in the near future.
Decreased drainage flow, stair climbing and local uptrend
During the bull cycle, the biggest threat to the trend is the potential sales from whales and whales. Before the sale occurs, some network indicators may indicate a selling intent. The most commonly used indicator for measuring vendor activity is cash flow to the stock exchange.
When whales prepare to sell bitcoins, they usually transfer their bitcoins to exchanges. In some cases, if a wealthy person deals with very large BTC assets, they may engage in peer-to-peer transactions in the OTC markets. But in most cases, whales use exchanges such as Coinbase, Gemini, and Binance. As such, when flows to the larger exchanges increase, this often indicates increased selling pressure on Bitcoin.
In the past month, as Bitcoin has grown, currency flows have not increased significantly. Ki Yong Joo, CEO of analyst firm CryptoQuant, confirmed on October 27 that the flow of bitcoin exchanges is slowing. On October 22, the flow of whales temporarily increased, leading to concerns of increased pressure from vendors. “He is still safe from dumping Bitcoin with dollars in the short term,” Joe noted.
In the absence of much pressure from sellers on the exchanges, derivative traders explained that the continued rally is immediate rather than futures. This distinction is important because when the rally is primarily driven by the futures market, it can increase the likelihood of a quick withdrawal. The reason for this trend is the possibility of successive settlement.
On the Bitcoin futures exchange, cryptocurrency traders place short or long trades with leverage. But it also indicates that if BTC falls 10%, the trade will be terminated and the trader will lose $ 10,000 in the capital base. When the futures market leads to a rally and traders fear a slight downturn, this can trigger a series of long futures contracts, causing the market to plummet.
However, the recent rally has generated significant demand from both the spot and institutional markets. “The market structure is distributed without pricing and monopolizing the stock market. Spot is a leader in derivatives. Do what you want from it,” said a bitcoin derivative trader under the pseudonym “Easy”. The steady increase in trading volume of LMAX Digital, Coinbase, Bakkt and Binance illustrates the dominance of the spot market in a recent bullish trend.
Finally, Bitcoin’s meteoric rise supports the argument that a big drop in prices is less likely. In December 2017, Bitcoin collapsed to reach $ 20,000 because the trend happened in such a short time, so there wasn’t enough time to create support and resistance levels. This time, Bitcoin is climbing the ladder and strengthening after each rise.