The price of Bitcoin (BTC) reached a new high of more than $ 42,000 on January 8, rising by 9% in just three hours. At the time, there was a high premium on Coinbase, which meant U.S. buyers were chasing the market by aggressively collecting BTC. But there is constant selling pressure from Asia, especially from South Korea.
Bitcoin corrected sharply after rising to $ 42,000 and falling by more than 7% in about eight hours. The sale coincided with significant whaling activities in major exchanges. Trading activities in the altcoin futures market also showed a similar trend. For example, on January 9 a whale dropped off a large part of Ether (ETH) longs for Bitfinex and earns profit for the first time since March 12.
Whales for sale in their masses since the beginning of 2021. As an example, when Bitcoin first exceeded $ 40,000, large whales began selling BTC, even though the price dropped below $ 40,000. Within three hours, on January 7, the so-called “mega whales” on Binance sold a total of four times, which was extremely volatile.
Where is Bitcoin going next?
Currently, the Bitcoin market is essentially seeing a battle between whales gaining their position and new buyers in the US market building up BTC. As such, there has been constant extreme volatility since Bitcoin exceeded $ 30,000. Due to the high inflow of capital into Bitcoin by Coinbase, the upward momentum of BTC is likely to be sustained within the foreseeable future.
The most important metrics you need to observe are the outflow of Bitcoin from Coinbase and the inflow of stablecoin into major exchanges. When high-value investors buy Bitcoin, they prefer to move the BTC for security purposes out of centralized exchanges. Therefore, high Coinbase outflows will mean a heavy accumulation of BTC in the United States.
When the inflow of stable currency is high, it indicates that the capital standing on the sidelines is moving back to the Bitcoin market. Instead of exchanging money, such as the US dollar, traders in the foreign exchange market, especially derivatives traders, park their funds in stable coins. Therefore, when capital stored in stable currencies begins to move again in cryptocurrencies, this typically indicates a bullish market structure.
Overall, the market sentiment around Bitcoin remains positive despite a surge over the past three months. Eric Wall, chief investment officer at Arcane Research, said in a tweet that Bitcoin has the potential to see a “very extreme peak” this time around. This would mean that even if Bitcoin could be overheated in the short term based on technical indicators, it would still be able to provide BTC room for further growth.
At the current price of about $ 40,000, the market capitalization of Bitcoin is valued at more than $ 740 billion. Given gold’s valuation of $ 9 billion, this would put the BTC’s market capitalization at around 8.2% gold. Bullish projections of Bitcoin, such as the thesis of the Winklevoss twins, expect Bitcoin to surpass gold over the long term. Based on this assessment, some analysts say that Bitcoin reaches 10% –20% of gold’s market capitalization is realistic.
Wall noted that Bitcoin is likely to peak if there appears to be a lot of “foam” in the market. If there is an unnaturally high degree of retail excitement surrounding Bitcoin, the likelihood of a temporary Bitcoin peak will increase. Wall says, however, that the next peak, given the unprecedented level of institutional interest in Bitcoin, could be much higher than many people think:
‘The reason is because our current macroeconomic climate is unprecedented – our economy is flooded with money. On top of that, we have just seen an incredible level of underwriting of the financial elite in favor of Bitcoin. And we know this time that the price is driven by institutions and retail at the same time. ”
What are the key technical levels to look at?
According to researchers from Whalemap, a data analytics platform that tracks Bitcoin whales or investors with high net worth, there are two major technical levels for Bitcoin in the short term. As long as BTC stays above $ 38,719 and $ 38,700, which are two major whale grouping areas, the researchers said the BTC’s bull trend remains intact.
Whale clusters form when whales accumulate Bitcoin at a certain price point and do not move their holdings thereafter. Clusters are theoretically the ideal support areas because whales want to accumulate more at levels for which they previously bought BTC as the price of Bitcoin falls. The researchers noticed: “Support at $ 39,719, invalid under $ 38,700. A gap between $ 39,719 and $ 32,180, allowing us to consolidate in the bear zone, could reduce it to $ 32,000. ”
On January 9, Bitcoin’s price dropped to as low as $ 38,700 and recovered strongly at the support level. This indicates that some whales are accumulating at this level, protecting it as a short-term support area to keep the BTC rally going.
However, Raoul Pal, CEO of Real Vision Group, said warned of the ‘New Year’s head fake’. Pal said hedge funds start talking about different risk assets at the beginning of the year. When many investors then buy, the market tends to correct at the end of the first quarter. If this counterfeit phenomenon coincides with a rising US dollar, Pal said he would be tempted to place S&P 500 wells. In the options market, there are short contracts that allow investors to bet on an asset or an index.
As Bitcoin and gold tend to move together, and a rising dollar could negatively affect both assets, a false New Year correction could result in both the Bitcoin and gold markets. Whether this correction will be as cruel as the March crash remains uncertain, but since BTC is being bought over at higher time frames, such as the weekly and monthly charts, the possibility of a deep correction nonetheless exists.