Ready for Impact? After hitting $ 42,000, Bitcoin price volatility may increase

The price of Bitcoin (BTC) hit a new all-time high of $ 42,000 on January 8, rising 9% in just three hours. At the time, there was a high premium on Coinbase, which meant that US buyers pushed the market up by aggressively hoarding BTC. But, there is continuing selling pressure coming from Asia, particularly South Korea.

Bitcoin price sharply corrected after climbing to $ 42,000, declining more than 7% in about eight hours. The sale coincided with a important whale activity in the main exchanges. Trading activity in the altcoin futures market also demonstrated a similar trend.. For example, on January 9, a whale Deposit a large portion of Ether (ETH) on Bitfinex, making profit for the first time since March 12.

Whales have been selling in droves since the beginning of 2021. For example, when the price of Bitcoin first topped $ 40,000, big whales started selling BTC even as the price fell below $ 40,000. In three hours, on January 7, Binance’s so-called “mega whales” sold a total of four times, causing extreme volatility..

Where is Bitcoin headed now?

At present, The Bitcoin market is witnessing a battle between the whales that profit from their positions and the new buyers in the US market that accumulate BTC. There has been constant extreme volatility since Bitcoin surpassed $ 30,000. Due to the high inflow of capital into Bitcoin via Coinbase, the bullish momentum for BTC would be sustained for the foreseeable future.

The key metrics to watch are Coinbase’s Bitcoin outflows and Stablecoin’s inflows on major exchanges. When high net worth investors buy Bitcoin, they prefer to take their BTC off centralized exchanges for security reasons. Thus, high Coinbase outflows would mean a huge buildup of BTC in the US.

When Stablecoin inflows are high, this suggests that underserved capital is returning to the Bitcoin market. Rather than cash out fiat currencies, such as the US dollar, traders on the cryptocurrency exchange market, particularly derivatives traders, place their funds in stablecoins. Thus, if the capital stored in stablecoins starts to move back towards cryptocurrencies, this usually suggests a bull market structure.

Overall, market sentiment around Bitcoin remains positive despite a rally in the past three months. Eric Wall, chief investment officer at Arcane Research, said in a Tweet that Bitcoin has the potential to have a “very extreme spike” this time. This would mean that Even if Bitcoin could overheat based on short-term technical indicators, the Bitcoin price could still have room for further growth..

At the current price of around $ 40,000, Bitcoin’s market cap is valued at more than $ 740 billion. Given the valuation of gold at $ 9 trillion, this would put BTC’s market capitalization at around 8.2% of gold.. Bullish projections for Bitcoin, like the Winklevoss twins thesis, anticipate that Bitcoin will outperform gold in the long term. Based on this assessment, some analysts say it is realistic for Bitcoin to reach 10% -20% of gold market capitalization.

Wall noted that the price of Bitcoin will likely peak when there is ostensibly a lot of “foam” in the market. If there is an unnaturally high level of retail excitement around Bitcoin, it would increase the probability of a Bitcoin time cap. However, Wall said that Given the unprecedented level of institutional interest in Bitcoin, the next high could be much higher than many imagine:

“The reason is that our current macroeconomic environment is unprecedented: our economy is being flooded with money. Also, we have just witnessed an incredible level of support from the financial elite in favor of Bitcoin. And we know that this time the price is being driven by institutions and retail trading at the same time. “

What are the key technical levels to observe?

According to researchers at Whalemap, a data analytics platform that tracks Bitcoin whales – or high net worth investors – there are two key technical levels for Bitcoin in the short term. As long as the price of Bitcoin remains above $ 38,719 and $ 38,700, which are the two areas with the highest concentration of whales, the researchers said that the uptrend of BTC remains intact..

Bitcoin whale accumulation. Source: Whalemap.io

Whale clusters are formed when whales accumulate Bitcoin at a certain price and do not move their holdings afterwards. Cumulus clouds are theoretically ideal support areas because whales would look to accumulate more at the levels at which they previously bought BTC if the price of Bitcoin falls.. Researchers they pointed out: “Support at $ 39,719, invalidation below $ 38,700. Gap in supports between $ 39,719 and $ 32,180, so consolidation in the bearish zone could lead to $ 32,000.”

On January 9, the price of Bitcoin fell to $ 38,700, rebounding nicely at the support level.. This indicates that some whales are accumulating at this level, protecting it as a short-term support zone to maintain the Bitcoin price rally.

However, Raoul Pal, CEO of Real Vision Group, warned about the “New Year’s Trick to mislead”. Pal said hedge funds start talking about various risk assets early in the year. Then when many investors buy, the market tends to correct at the end of the first quarter. If this counterfeiting phenomenon coincides with a rise in the US dollar, Pal said he would be tempted to place S&P 500 puts. In the options market, puts are short contracts that allow investors to bet against an asset or an index.

Considering that the price of Bitcoin and gold tend to move together, and that a rising dollar could negatively affect both assets, a new year’s trick to mislead could cause corrections in both the Bitcoin and gold markets. It remains uncertain whether this correction would be as brutal as the March slide, but given that BTC is overbought in higher timeframes such as the weekly and monthly charts, there is the possibility of a deep correction.

Don’t stop reading:

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.