Hope for the possibility of another significant rally in the cryptocurrency market has returned, even though Bitcoin (BTC) rejected at $45,500. Currently, bulls are looking to shore up their defense at the $43,000 support level.
Data from Cointelegraph Markets Pro and TradingView shows that after making a run to a weekly high at $45,500 early on Tuesday, bears managed to drop the price of BTC to $42,900 during afternoon trading as investors realized profits and prepare to place bids around $38,000.
Here’s a look at what analysts are saying sparked the rally in BTC price over the past week and what levels to keep an eye on moving forward.
Legitimate breakout or a short squeeze?
The sudden move higher caught many traders off guard as headlines across the crypto space were predicting the onset of an extended bear market, but such dire warnings may have been premature based on data from a recent report from Glassnode. The blockchain analysis firm stated that “prices have bounced off a number of fundamental levels that have historically signaled undervaluation or a ‘fair value’ price.”
Through analyzing the data of liquidations on futures exchanges, Glassnode surmised that while the Long Liquidation Dominance charts “show that shorts have been on the back-foot this week, with a minor skew towards short side liquidations,” the lackluster magnitude of this metric indicates “that it is unlikely that price upside is being primarily driven by a short squeeze.”
Glassnode noted that during previous instances of major price declines, the futures open interest (OI) saw significant drawdowns or “de-leveraging events” as shown by the large downward red spikes on the graph above, a feature which is noticeably absent from this latest price decline.
“This may indicate the probability of a short squeeze is lower than first estimated, or that such an event remains possible should the market continue higher, reaching clusters of short seller stop-loss/liquidation levels.”
“We’re still in a traders’ market”
The forces in the wider financial markets that are impacting Bitcoin price were addressed by David Lifchitz, managing partner and chief investment officer at ExoAlpha, who highlighted the recent correlation between BTC and tech-stocks and questioned what it will take for “Bitcoin to get its destiny back in its own hands.”
According to Lifchitz, “stocks are still in ‘la-la-land’ whereas bonds are more in reality,” helping to provide a clearer picture as to the strength of the global financial markets based on the fact that “bonds tend to lead the way for stocks, and bonds are already struggling.”
When it comes to what comes next for BTC, Lifchitz offered reassuring words for bulls worried about the large head and shoulders pattern on the BTC chart, stating that the pattern was “invalidated by the recent bounce in BTC price.”
Moving forward, Lifchitz identified the near-term targets for Bitcoin at $48,000, $51,000 and $53,000 but warned that there is a possibility for a “pullback to the mid/high $30,000s” before hitting $53,000.
“In the meantime, we’re still in a traders’ market with opportunities to grab a few points here and there between the soft targets: profits should be quickly taken off the table on each small pullback, then rinse, repeat. Without any macro catalyst, it’s hard to see Bitcoin trend much higher in a straight line.”
Bitcoin is “the Amazon of our time”
A final bit of insight into the price action for Bitcoin as it compares to the growth of Amazon stock price was offered by analysts at Macro Hive, a financial market research outlet that considers Bitcoin to be “the Amazon of our time.”
Macro Hive highlighted that “even Amazon suffered large drawdowns that took years to recover from” and they suggested that “your exposure to Bitcoin needs to be appropriately sized so that you can survive 50% to 80% drawdowns.”
“But major drawdowns also provide good entry levels for exposure. Our metrics suggest that we are getting closer to that point, so we would consider accumulating exposure. However, we would not go max long in an environment of rising central bank rates and falling global growth momentum.”
The overall cryptocurrency market cap now stands at $1.949 trillion and Bitcoin’s dominance rate is 41.7%.