Bitcoin slumped to $10,500 in the first week of October and has
recovered above $11,000. Traders explain what happens next for BTC.
The price of Bitcoin (BTC)
has seen a recovery during the past week, surging by nearly 6.5% since
Oct. 2. The resilience of the dominant cryptocurrency has traders
pleasantly surprised, as many analysts anticipated a larger pullback.
Following BTC’s rebound above the critical $10,500 support level to just
over $11,000, the sentiment is turning optimistic.
In the near
term, traders believe $10,500 remains the most critical level for
Bitcoin for numerous reasons. Most notably, it represents a historically
important support level in both the ongoing cycle and previous price
cycles. Throughout 2019, BTC consistently peaked at $10,500 and saw
brutal rejection afterwards. Given that the $10,500 level has served as a
heavy resistance area in the past, it is considered a strong support
level.
Whale clusters or bubbles also show that defending $10,500
is key for Bitcoin to retain its momentum. Whale clusters, tracked by
researchers at Whalemap, form when whales buy Bitcoin at a certain
level. Recently, whale clusters have emerged
in the $10,407 to $10,570 range, which means whales are likely
accumulating. Since whales tend to trade with a longer time frame, there
is a decent probability that the $10,570 area will remain as a strong
support level.
In
the medium term, traders foresee $13,000 as the main hurdle before
Bitcoin sees a prolonged rally. According to the pseudonymous trader
known as “Salsa Tekila,” previous macro price trends indicate $13,000 is
the roadblock to an all-time high. If BTC continues to stabilize and
consolidate above key support levels, the trader said a rally to a new record-high could occur in the longer term.
Whether
Bitcoin can stay above $10,500 and eventually break out at $11,000 to
test $13,000 remains the biggest challenge. Between the first five days
of October, various negative macro factors slowed the momentum of BTC.
Since then, particularly following Square’s high-profile investment into
Bitcoin, the top cryptocurrency has recovered. In the fourth quarter,
the bullish scenario hinges on BTC’s strength above $10,500 and whether
it can surge past $11,000.
Why did Bitcoin plunge in October?
In
the first week of October, Bitcoin faced several threats that could
have evolved into potential black swan events. On Oct. 1, the United
States Commodities and Futures Trading Commission and the Department of
Justice charged BitMEX and its executives. They alleged that BitMEX violated the Bank Secrecy Act,
arresting BitMEX chief technical officer Samuel Reed in Massachusetts.
After the DoJ publicly released a statement on the arrest, Bitcoin fell
by 5% in the following 48 hours.
Then, on Oct. 2, U.S. President Donald Trump confirmed
on Twitter that he had contracted COVID-19. The news quickly rattled
financial markets, causing equities to slump and Bitcoin to pull back in
tandem. In the span of two days, BTC faced two unexpected macro events
that considerably slowed its momentum as it hovered above $10,900. Had
the two events not occurred, a retest of the $11,000 resistance level
would have been likely.
Now a week later, Bitcoin has recovered
above its price level at which the BitMEX and Trump news came to light.
The resilience of BTC against two events that could have potentially
caused the markets to further plummet is encouraging.
Factors behind BTC’s recovery
There
are several key factors that aided the recovery of Bitcoin from the
initial drop below $10,500. First, the U.S. dollar has declined in the
past 14 days, indirectly causing BTC and gold to rally. Second, the news
around Square’s $50 million Bitcoin purchase lifted the overall
sentiment. Third, some analysts state that BTC was bullish before the
Square news happened, with a favorable technical structure.
When
major decentralized finance tokens plunged, it led to nervousness in the
market. According to “Light,” a pseudonymous options and futures
trader, the short-term recovery of BTC is positive. In the near term,
the trader suggested
that an uptrend is more likely than a breakdown. “Bitcoin $BTC was
already bullish before the Square news with no supply selling bottom of
this trendline even as $YFI tried to kamikaze the whole market. Obvious
what comes next.”
Compared to MicroStrategy’s $425 million bulk
BTC purchase, the $50 million investment is nowhere large enough to
solely cause Bitcoin to soar. While Square is an $81 billion
conglomerate and $50 million is a decent-size investment, it is not a
major bet, although the implications were deemed substantial. Speaking
to Cointelegraph, Denis Vinokourov, head of research at crypto exchange
and broker Bequant, said the CFTC’s action against BitMEX is also a
positive long-term development for Bitcoin:
“Markets do
not like uncertainty and this also applies to digital assets, despite
the apparent lack of consistent correlation to traditional assets. Some
sort of resolution to the election drama in the US will be welcomed and
the cleansing of the digital assets ecosystem, this time by the CFTC on
Bitmex, is positive for long-term developments in the space.”
Where is BTC heading?
Based
on the recent trend of BTC, its pullback in October, and subsequent
recovery, traders remain neutral and optimistic. The majority are not
largely bearish in the short to medium term due to the strength of the
$10,500 support level. If the support breaks down, then the sentiment
could change, but it has held up well so far.
Michael van de Poppe, a full-time trader at the Amsterdam Stock Exchange and Cointelegraph contributor, said
that Bitcoin should first break the $11,000 to $11,200 resistance
range, after which “acceleration” could occur. But there is also a
possibility that BTC would see a low-volatility range between $10,500 to
$11,200 in the foreseeable future.
Van de Poppe also emphasized
that Bitcoin is likely in the early phase where smart money and
institutions are beginning to enter. Square and MicroStrategy’s bold
investments in BTC could lead to an improved perception of BTC as a
store of value; at the latest, it’s a bullish sign in the long term for
van de Poppe: “The market is in the early stages of Smart Money and
Institutional Investors, as MicroStrategy and Square opt-out of the U.S.
Dollar and opt-in on $BTC. Very bullish long term.”
Citing the realized volatility of BTC, which recently crashed to 20% for the seventh time in five years,
other traders said a volatility spike is expected. Historically, when
that has happened, the volatility of BTC spiked to 80% in the several
months following. Given the likely upsurge of volatility in the near
term, cryptocurrency trader Cantering Clark believes
a major price movement is expected: “I think that given this prolonged
state of compression that we get a big move before the weekend for $BTC.
Either direction, I doubt we get some cookie-cutter retest.”
In
the short term, traders expect BTC to successfully retest the $11,000
resistance level and range between $10,500 to $11,000. In the medium
term, analysts expect a potential breakout above $11,000, which could
establish a broader range between $11,000 and $13,000 in the longer
term, with the latter being the major roadblock to an all-time high. The
confluence of a favorable technical structure, strong fundamentals as
seen in Bitcoin’s hashrate, and growing institutional demand indicates
that the general market sentiment remains positive.
source link : https://cointelegraph.com/news/bitcoin-price-breaks-11k-crypto-traders-optimistic-about-btc-s-action
