Bitcoin (BTC) price surpassed USD 16,000 with strong momentum and has remained above resistance-turned support since the initial breakout. Still are merchants turn slightly gently, anticipating a short-term “re-accumulation” trend.
The term re-accumulation refers to investors gradually repurchasing Bitcoin after a massive rally. This allows the dominant cryptocurrency to consolidate, rebuild momentum and neutralize the overheated market.
There are several reasons for this expects a trend of re-accumulation or consolidation to occur in the near future. These factors are historical cycles, market greed and high unrealized gains.
The 1-hour price chart of Bitcoin. Source: BTCUSD on TradingView.com
Historical cycles point towards Bitcoin re-accumulation in the USD 15,000 region
Technical analysts, including John Bollinger, have said consolidation in the Bitcoin market is increasingly likely.
Bitcoin recently crossed the USD 16,000 resistance level for the first time in nearly three years. This also means that the $ 16,000 to $ 17,000 range remains an attractive area for sellers.
While the hourly and daily charts for Bitcoin show a fairly steady upward movement, high timeframe charts show a steep climb to the $ 16,000 level.
Both the weekly and monthly charts of Bitcoin are significantly above the short term moving averages (MAs) such as the 5 day, 10 day and 20 day MAs. This could indicate that BTC is being bought over at a higher timeframe.
A pseudonymous trader known as “Crypto Capo” said a re-accumulation of between $ 14,500 and $ 16,000 is likely. “I expect a re-accumulation range between 14500-16000,” the trader said.
Extreme greed in the Bitcoin market
According to Alternative’s Crypto Fear & Greed Index, the Bitcoin market is showing signs of ‘extreme greed’.
On a scale of 100, where zero indicates fear and 100 indicates greed, the Bitcoin market is currently around 89.
Based on similar on-chain statistics and Bitcoin’s historical technical structures, traders expect volatility between $ 14,000 and $ 16,000.
A potential Bitcoin reaccumulation trend. Source: Edward Morra, XBTUSD on TradingView.com
Traders are sitting on big unrealized profits
In addition to the technical and fundamental factors, on-chain data shows that traders are generally on large unrealized gains.
The term unrealized profits refers to the profits of traders that have yet to be realized by selling.
When traders start selling large unrealized profits, it can lead to a downturn in profit taking. As a result, Bitcoin could start to consolidate leading to re-accumulation.
There is a variable in the form of exchange reserve
One variable that could prevent a sharp decline in the Bitcoin market is the decline in foreign exchange reserves.
Traders typically deposit BTC on exchanges when they plan to sell their holdings. Thus, if reserves decline, it shows the intention to sell BTC from traders, and vice versa.
Vetle Lunde, an analyst at Arcane Research, noted that BTC’s deposits on major exchanges have fallen 19% since March. She said:
“BTC deposits on major exchanges have fallen by more than 560,000 BTC (19%) since March 15. The aggregated exchange rate balance fell just below 2.4 million BTC for the first time since August 2018. “