Bitcoin’s price continues to move rapidly towards $ 18,000 and many traders are calling for the market’s leading digital asset to break above the 2017 all-time high at $ 19,763. Unless you’re bearish, hitting a new all-time high is great, but ideally, For a sustainable rally to keep pace, an uptrend in the form of stairs is better than a sudden rally.
In the last weeks, the price of BTC has risen continuously without seeing long periods of consolidation or major drops.
Chances of a blow-off top occurring are increasing
A pseudonymous trader known as “Squeeze” specified that the lack of consolidation periods in Bitcoin has been a trend since late October and hinted that this may stifle the momentum of the current upward movement.
While Bitcoin’s momentum has been solid, the price has also increased nearly six-fold since the March crash. When the price of BTC continues to rise without major corrections, the likelihood of a large pullback will occur increasesor. The trader wrote:
“Consolidations are getting shorter without much pullback. The blow-off top is coming soon.”
Peter Brandt, A well-known veteran trader who is also aware of BTC price action, raised a similar point of view earlier this week. Brandt noted that In previous bull runs, BTC experienced nine corrections before hitting a high.
In the current uptrend, at least to date, Bitcoin has seen two major corrections. Compared to historical uptrends, BTC has seen considerably smaller corrections. The wrote:
“During the 2015-2017 bull market in Bitcoin $ BTC, 9 significant corrections occurred with the following averages: 37% drop from high to low. 14 weeks from an all-time high to the next. Since the low in early September, two 10% corrections have occurred. “
Since the November 8 crash, the price of Bitcoin went from $ 14,344 to $ 17,858 on Binance. In just ten days, BTC saw a gain of roughly 25% with a clear consolidation phase.
The pattern of a rally followed by occasional consolidations and corrections is key to seeing a prolonged rally as it neutralizes the futures market and lessens the possibility of a blow-off top.
In technical analysis, A blow-off top refers to when the price of an asset falls suddenly and abruptly. As an example, BTC saw a blow-off top after the 2017 high. In the 52 days since, the price of BTC fell by almost 70%.
Since Bitcoin is approaching a price discovery phase above $ 20,000, traders expect BTC to take a dip before it can hit $ 20,000. But there is the possibility that this operation is saturated, as many analysts seem to anticipate a similar scenario.
Futures funding rates are neutral
A variable that could make the rally continue in the short term is the financing rate. On the major futures exchanges, The BTC futures funding rate stands at 0.01%.
Futures exchanges in the cryptocurrency market implement the mechanism called “financing” to achieve balance between traders.
When most of the traders in the markets have long positions in Bitcoin, the funding rate turns positive. If this happens, the holders of long contracts (buyers) have to incentivize the sellers and vice versa.
The major futures exchanges, such as Binance Futures, show a funding rate of 0.01%, indicating that the current rally is not overextended.
As a last resort, traders are still expecting Bitcoin to see a blow-off top when the price approaches $ 18,000. Meanwhile, technical analysts pointed out that the recent BTC price cycle shows that each rally has been followed by shorter periods of consolidation.