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Bitcoin broke $40,000 in a strong recovery rally over the past three days as BTC could stabilize above the key level in the foreseeable future.
Image courtesy of CoinTelegraph
FEB 06, 2021
The price of Bitcoin (BTC) broke above $40,000 on Feb. 6 for the first time in 23 days. But this time, the market sentiment is a lot calmer with a less overheated derivatives market.
The combination of a less crowded Bitcoin futures market, the selling pressure from whales peaking, and a fast recovery could help BTC stabilize above $40,000 this time.
On Jan. 29, a pseudonymous Bitcoin researcher and analyst known as “Material Scientist” said that “mega whale” order flow reached an all-time high.
This means that the selling pressure coming from whales dealing with $1 million to $10 million orders reached a record-high. The analyst said at the time:
“Whales bought back almost everything they had sold since $40k, and mega-whales are about to make a new ATH on their orderflow. Downtrend is over, IMO. New ATH soon, don't miss it!”
Bitcoin exchange data with whale orders (brown line). Source: Material indicators
If the price of Bitcoin establishes $40,000 as a new support area, it would establish a highly positive short-term price trend for BTC.
It would mean that BTC can now rally towards its all-time high without the massive selling pressure coming from major whales and high-net-worth investors.
In the near term, for Bitcoin to maintain its bullish structure, it would need to protect two key support levels: $40,000 and $37,834.
Meanwhile, according to the analysts at Whalemap, a data analytics platform that tracks whale data, there is a confluence of whale supports at $37,834 and $36,290.
If Bitcoin breaks down from $40,000, these two support areas would be critical to defend. Below these two levels would likely result in a short-term bearish trend. The analysts wrote:
“Confluence of whale supports at $37834 --> $36290. A new cluster formed yesterday in that area too. This should give BTC a nice base to take off from if we ever get there. Otherwise $39843 should provide some help too.”
Whale cluster support levels. Source: Whalemap
In the foreseeable future, some traders anticipate Bitcoin to surge beyond $60,000 with the momentum from the ongoing rally.
Scott Melker, a cryptocurrency trader, said there will be pullbacks, but Bitcoin would likely reach $63,000 following the breakout. He said:
“There will be pullbacks, maybe even to retest the top of the flag as support. But technically this is a confirmed breakout that should take $BTC to 63K eventually. Disclaimer - patterns rarely reach their targets, but the rules are the rules.”
Bitcoin technically broke out of the bull flag when it surpassed $38,000 on Feb. 4. Considering that Bitcoin is looking stronger than the last time it broke $40,000 a month ago, there is sufficient momentum to carry it past $50,000 this time around.
A potential catalyst in the near term could be Guggenheim potentially confirming its investment in Bitcoin after securing the rights to invest in the Grayscale Bitcoin Trust in February.
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Original article posted on the CoinTelegraph.com site, by Joseph Young.
Article re-posted on Markethive by Jeffrey Sloe
