The exchange rate turned from $ 50,000 in a matter of seconds, but also corrected just as quickly
Profit realization? Flash Crash? Maybe institutional investors got out of the market? Let’s see what happened to bitcoin this week, what could have caused the exchange rate to fall and the subsequent quick correction.
This is what happened this week with bitcoin: “Elon candle” and its effect - which we will mention for a long time to come.
Last Monday’s “Elon Candle” won’t be seen on the chart any time soon, but this week, the trading days didn’t get boring either.
With a very strong, almost record-length green candle, bitcoin jumped from $ 39,000 to $ 44,000 in 1 hour on February 8, as news came out that Elon Musk’s Tesla company, worth $ 1.5 billion bought bitcoin.
The exchange rate was able to keep up rapidly throughout the week. After the announcement, the exchange rate did not fall below $ 44,000, but rather cryptocurrency was sidelined in the $ 46-48,000 range.
Meanwhile, the number of bitcoins stored on cryptocurrency exchanges is breaking extreme new records in an extreme way. Compared to the last 12 months, last year there were still 3 million bitcoins on the stock exchanges, while today it is only 2.3 million pieces, a 22% decrease.
While bitcoin is flowing out of traditional bills, derivative markets have experienced a renaissance. Here, too, in an annual comparison, the number of open futures positions in the largest derivatives markets increased from $ 3.5 billion to $ 16.5 billion.
Elon's candle did not spare the bitcoin shorts either. A total of $ 438 million in short positions were liquidated by stock exchanges in response to the news because the exchange rate soared so quickly and to such an extent that deposit requests could not keep up with the competition.
There are two groups in the market who, by the nature of their business, are in a selling position: miners and those who hold old bitcoins.
Miners cut their net bitcoin positions for most of January, however, Tesla reported that sales sentiment for miners had slowed significantly and almost began to accumulate again. On the other hand, those sitting on old bitcoins seem to be very happy with the high exchange rate, as many of them have made a profit.
BTC / USD Technical Analysis: 3 possible reasons why the bitcoin price fell on Monday
Yesterday, shortly after the exchange rate was below $ 50,000 on Sunday, bitcoin suddenly fell. The exchange rate weakened from $ 49,000 to $ 46,000 in a few hours. However, the deep flight did not last long, the exchange rate clung back to previous levels in almost no time.
Experts have cited several possible reasons why the bitcoin exchange rate has weakened so suddenly, so much.
One possible cause was funding stress brought up by Matthew Dibb of Stack Funds. The cost of long positions reached 0.109% on Sunday, a 12-month record high. According to this, there was a lot of significant leverage in the bull market, which made the market quite oversold. The cost of financing has been rising steadily since early January, and this was compounded by Tesla’s announcement of hot fire, which the market simply could no longer handle. This also means that up to the exchange rate level of 40,000, most of the derivative products were driven by bitcoin.
CryptoQuant analysts measured declining institutional investor sentiment on Monday as the exchange rate fell. The difference between the price of COINBASE Pro and BINANCE is usually interpreted as meaning that if it is positive, there is a significant willingness to buy institution, if it is negative, then retail investors are predominant in the market. The indicator turned negative when the exchange rate fell significantly and remained in the neutral range thereafter, indicating that institutional investors did not take advantage of the exchange rate fall this time to acquire additional bitcoins.
This is also in line with the fact that fund manager Grayscale has not made such a significant bitcoin purchase recently as it did at the end of last year. These are also very important developments because institutional investors currently hold nearly 3% of the bitcoin stock in circulation. Therefore, if they start selling, there may be a significant exchange rate movement.
Last but not least, we can’t go without a word next to the graph above either. Coindesk analysts pointed out that while the price of bitcoin rose very significantly from $ 30,000 to $ 49,000, it was not followed by an increase in turnover. The 10-day moving average has been falling since early February. In similar cases, it is often the case that significant falls without heavy traffic are suddenly followed by a correction.
Despite the RSI emerging below 40 on Monday on the 1-hour chart, over a longer period of time, the fall in the exchange rate on Monday did not really have a particular manifestation. On the 4-hour graph, the momentum indicators are still in the normal range, and on the daily graph, today’s hiccups did not appear in the RSI or MACD either. The still-moving moving averages and the RSI moving at the edge of the outdated range indicate that the bulls did not disappear from the market at all, nor is it a coincidence that the exchange rate corrected upwards again after the fall.
Many traders have set up sales at 50,000, but if the exchange rate breaks this psychological level very abruptly, it could lead to a significant short squeeze. And since Wallstreetbets and GME, we know that the shortos are now disliked by the public. If the exchange rate rises rapidly significantly, bitcoin could jump up to $ 60,000 in the future.
On the other hand, this is not the first time the exchange rate has tried to take in $ 50,000. Failure to break through this resistance in the near future could force more traders to make a profit in the short term. Keep in mind that there are still fewer and fewer days when it was not profitable to buy bitcoin. If widespread profit collection takes place, it could push bitcoin under the 44,000 support, up to a 20-day moving average ($ 42,000), below which only a 50-day moving average can provide shelter at $ 36,000.
Looking to the future: bitcoin trading ideas
Analyzing the Eliot waves on the daily graph, the bitcoin arrives at the end of the cycle according to the analyst below. Although he thinks it is conceivable that the price of bitcoin will rise even further from this point, the end of the shape could also bring a trend reversal. However, it is not possible to see exactly where the top of the wave may be, so the exchange rate may even go up before the end of the formation, but it is definitely necessary to be prepared for the increased risk.
On the 4-hour graph, the following analyst is 100% optimistic about the next period. In his view, $ 50,000 is just the beginning, much higher than that, waiting for bitcoin for 55 and 58 thousand in the coming days. Behind his analysis is that the RSI is in the neutral zone, but is already twisting upwards, while lower trading volumes are associated with smaller and smaller bottoms.
Also on the 4-hour graph, an upward-curving channel has been outlined by the analyst below, with a bottom at $ 47,000 - in his view, this support is much needed to sustain the upward trend. Upwards, however, if bitcoin leaves the band at 52,000, it can fly the exchange rate to new heights.
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