The price of Bitcoin (BTC) hit a new all-time high on February 11, surpassing $ 48,500 on major exchanges. Since then, the dominant cryptocurrency has consolidated, showing no real momentum to break the record in the near future. However, analysts have not been intimidated by the consolidation after breaking a new high.
Market commentators generally say that when an asset is moving slowly or consolidating after an explosive move up, it is a sign of a healthy market. In the case of Bitcoin, stabilization after a strong upward momentum is essential in the current situation due to the saturation of the futures market. If the price of Bitcoin continues to rise without a proper pullback, the probability of a short-term “long squeeze” would increase.
A “long squeeze” occurs in the futures market when the market is saturated with buyers or long contracts, and as a result, the financing rate becomes highly positive. When the financing rate is above 0%, buyers have to pay a portion of their position as commission to their short-selling counterpart every eight hours. This mechanism is used by futures exchanges to achieve equilibrium in the market, so that the market does not tilt to one side for an extended period.
Taking into account the negative effect of an imbalance in the futures market and The fact that the funding rate of Bitcoin futures is constantly above 0.1%, which is 10 times the normal 0.01%, a longer consolidation is bullish for Bitcoin. But this is because BTC is holding above crucial support areas, which has apparently settled at $ 44,214, acting as a crucial support level for the whale group in the near term.
Where is Bitcoin headed?
In an interview with Cointelegraph, Guy Hirsch, US CEO at eToro, highlighted that Tesla’s $ 1.5 billion purchase of BTC took the market by storm. The news triggered a major sentiment shift, leading many investors to perceive it as a turning point in the history of the cryptocurrency market. and in the way that public companies would perceive crypto assets. The news also came as MicroStrategy was conducting a seminar with more than 1,400 companies to discuss Bitcoin.
Hirsch explained that the synergy between Tesla’s purchase of Bitcoin and the fact that MicroStrategy continues to spread the merit of BTC as a store of value and as a corporate investment It would prompt more public companies to follow through with similar announcements. If this trend occurs, Hirsch underscored that a push toward $ 50,000 before the end of the second quarter is plausible, adding:
“We’re likely to look back and see MicroStrategy and Tesla as the forefront of this new way of using companies’ treasury assets to appreciate cash holdings, rather than just sticking with them, and see this as a point. inflection not only in the history of Bitcoin, but also of how publicly traded companies act and serve in the best interest of their shareholders. “
Traders also generally express optimism regarding the Bitcoin price trajectory in both the short and medium term. An operator with a pseudonym known as Loma said that BTC’s “relative downside is very small” at the moment, considering the strong market sentiment around it. The trader pointed out that “$ 50,000 is unavoidable”, and if BTC falls “a little earlier” it is not a major problem.
A “black swan” event could, in theory, cause a 30% -40% correction in the price of Bitcoin, as seen throughout its past bull cycles. Nevertheless, Bitcoin is seeing an unprecedented level of buyer demand from high net worth investors and institutions that weren’t as active in recent years.
The influx of new institutional investors represents an important variable that could propel BTC’s momentum towards the $ 50,000 to $ 70,000 range. The continued increase in liquidity in the traditional financial market is further catalyzing the appetite for inflation hedging assets, including Bitcoin and gold.
A potentially bearish case for BTC
A crypto whale known as Waro said that there is a scenario where Bitcoin could see a potential pullback in the short term. The trader explained that if BTC struggles to break out of $ 48,000, it could see its momentum wane and see a 5% -15% drop for the foreseeable future.
According to him, this would be a positive trend for BTC as it would allow it to access some of the liquidity and large buy orders in the low $ 40,000 range: “I was one of the first to ask for 52k a week ago and now everyone is ecstatic and screaming for 50+ while bitcoin is struggling with this resistance. It’s not bearish, it just needs more fuel, that’s all“.
A key factor that could counteract a potentially bearish market sentiment around Bitcoin is the decrease in selling pressure from miners. In the past two weeks, miners have sold large amounts of BTC, putting pressure on the short-term price trend of Bitcoin. Since miners are one of the few external sources of selling pressure in the cryptocurrency market, elevated levels of selling activity can suppress Bitcoin’s uptrend.
Lex Moskovski, a cryptocurrency investor and quantum trader, discovered that miners “They’re not that eager to sell their #Bitcoin the last two weeks.” He said that either miners are anticipating that the price of Bitcoin will increase substantially for the foreseeable future or they have run out of BTC to sell in the short term.
Either way, this trend is a Positive catalyst for Bitcoin that could counter the downtrend around the cryptocurrency market and push BTC towards a new all-time high above $ 50,000.
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