There are three potential reasons why the $20,000 resistance level is not easy to overcome: bull traps, psychological resistance in the market, and overheated derivatives markets.
(Picture) The highest historical price of Bitcoin on major trading platforms
Last night, Bitcoin rushed to around $19,400, just one step away from the historical high. There are three potential reasons why the $20,000 resistance level is not easy to overcome: bull traps, psychological resistance in the market, and overheated derivatives markets.
The bull trap refers to the technical form of the main force using funds, news or other means to manipulate the chart to make it show the signal of the long arrangement, inducing retail investors to chase the price and buy, and then there is a sharp drop to kill the more. There have been 5 bull traps in the main rise of Bitcoin’s last bull market, and the callback range of each wash is between 30 and 40 points, causing retail investors to chase high and then cut meat or liquidate their positions (this is also a lot of people Reasons for losing money in a bull market).
It can be expected that if Bitcoin sees a sharp correction at a position close to $20,000, there will be various bearish arguments such as “Bitcoin is building a historical double top” and “Bitcoin is about to enter a down cycle.” Therefore, chasing long orders or spot stocks that are close to a new high will suffer abnormally.
Market psychological resistance
If Bitcoin breaks through historical highs, it will undoubtedly start a new journey of price discovery. In theory, Bitcoin can achieve various goals shared by many industry players and analysts in the past. According to the current cycle, most analysts predict between US$25,000 and US$100,000.
At this critical juncture, market funds are still relatively cautious, after all, it is a historical high, and there will inevitably be shorts to actively defend. The temptation to go short is still great, because as long as the bulls can be successfully attacked at key points that are highly anticipated, the market will follow suit, and the shorts will reap huge profits.
Very high long rates
Currently, in major cryptocurrency trading platforms, the funding rate of Bitcoin perpetual swap contracts is between 0.05% and 0.1%. This means that longs have to pay fairly high fees to shorts. Due to the extremely high rate of long positions, short selling around $20,000 is also very attractive.
After analyzing the bearish factors, let’s take a look at the main factors that support the continued rise of Bitcoin: the hoarding of giant whales, the reduction of exchange supply and the trend of trading volume explosion.
Giant whale hoarding coins
When Bitcoin giant whales are bought at a certain price point and hold the coins, swarms of giant whales will appear. This is a signal that the giant whale is hoarding coins and has no intention of selling in the short term. In November, as the price of Bitcoin increased, swarms of giant whales (the green circle in the picture) were steadily forming.
The difference between Bitcoin’s current rally and previous price cycles is that the recent uptrend has proven to be more sustainable. In fact, every swarm of giant whales shows that every major support level of Bitcoin is accompanied by the hoarding behavior of giant whales.
In addition, data from the on-chain analysis platform Santiment also shows a similar trend. Researchers have found that the number of Bitcoin whales has increased significantly in recent months. In the past few days when the price of Bitcoin has soared above $18,000, the number of giant whale addresses holding at least 10,000 BTC has surged to 114. In addition, the number of giant whale addresses holding at least 1,000 BTC is as high as 2,449, a new high.
A continuing trend of the bull market cycle in 2020 is the continued decline of the trading platform’s Bitcoin balance, which means that there is less selling in the market. Every time a spot exchange increases its BTC balance, the new supply is almost quickly exhausted.
Surge in trading volume
Since September, the number of institutional transactions and spot transactions has been growing rapidly. In November, the open position of CME’s bitcoin futures and options exceeded $1 billion, while Binance BTC/USDT’s single-day trading volume has remained at a level of over $1.5 billion.
The data shows that the spot market has always dominated the rising market, not the derivatives or futures market. This trend makes the gains more stable and reduces the risk of a large-scale fall. When the futures market accounts for most of the trading volume during Bitcoin’s rise, there is a lot of liquidation risk. The spot market has been leading the rise this time, making it more sustainable.
Active over-the-counter market
(Picture) Bitcoin liquidity ratio hits a three-year low
On-chain data shows that the over-the-counter market is active, which usually indicates that giant whales, high-net-worth investors, and institutions may be buying Bitcoin. CryptoQuant data analysis company believes that due to the Bitcoin liquidity ratio reached a three-year low a few days ago. The transaction volume of deposits and withdrawals on the trading platform only accounts for 3% of the transaction volume on the chain. Although there may be some price corrections for Bitcoin, the $20,000 resistance will be taken down.
Disclaimer: Investment is risky, you must be cautious when entering the market. This information is not intended as investment and financial advice.
Original Source: Blockchain Headlines