“Bitcoin’s price crashes!” You may have read it in some media outlet last week. Although the price drop may have looked relevant for newcomers, putting it into context with the parabolic price rise over the last year, it looks like a mere blink.
The price found support on the 0.23 Fib retracement on the last uptrend. If that doesn’t hold, there could be a further downside of 20 to 30%.
The vertical direction of the price was not sustainable. And when the market loses steam (and buyers), it needs to refuel both at lower prices. Looking closely at the market with low time frames last week would have resulted in staring at only long red candles, which will directly switch on the “panic mode”.
Take a step back, instead, and look at the big picture. One interesting aspect of this ramp-up since March is that we can assume it was fuelled mainly by spot buyers and non-speculative players. Overlapping the number of short and long leveraged positions (according to Bitfinex data) with Bitcoin’s price chart, you will see that Bitcoin is one step away from an all-time high despite the significant headwind of short positions building in parallel.
If that is not a positive insight per-se, consider that the risk of severe drops caused by long liquidation is not very high. The number of long positions is close to the lowest in 2020.
The short-squeeze from the last couple of days already contributed to pushing the price higher. If the psychological mark of $20,000 breaks there is a large margin for traders to grow their long positions to add momentum.
The uptrend from the last months seems to be driven mainly by spot buying. This could be consistent with the news that the Grayscale Bitcoin Trust has been attracting funds at increasingly high rates since March. They are now holding over 500,000 BTC. Other corporate institutions are also piling up Bitcoin into their reserve treasuries, which adds optimism to the long-term macro scenario.
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