The price of Bitcoin (BTC) was rejected again on December 4 by the USD 19,500 resistance level, with traders becoming increasingly uncertain of what’s next for BTC / USD.
The Bitcoin rally is stuck at $ 19,500
Some envision the dominant cryptocurrency going through a consolidation phase or some other minor correction in the near term, especially as the US dollar show signs of possible recovery.
However, others expect the crucial support level of USD 18,500 to remain, which would likely see BTC retest the key USD 20,000 and a new all-time high in the near future.
In the short term, traders generally foresee two main levels of support and resistance for Bitcoin. First, the USD 18,500 area is critical in ensuring that BTC’s bullish market structure holds up. Second, the USD 19,500 level is a huge resistance level for BTC. As BTC crosses USD 19,500, traders expect another run-up to its all-time high that’s currently just under $ 20,000.
Meanwhile, Bitcoin is becoming increasingly difficult to trade due to its volatility at the USD 19,500 resistance level. BTC saw a serious sell-off every time this area was tested in the past week.
A pseudonymous trader known as “CryptoGainz” believes the ideal entry point for Bitcoin traders is now above the USD 19,500 resistance level. However, this may not be the case for two reasons: it again puts traders at risk of a steep sell-off near the record high as $ 20,000 remains a risky selling wall for the bulls. He said:
“What is annoying to me about this price action is that if my bids are not met then I will have to extend the breakout which will give me about 19.7k or higher right now. This means that my entry is not safe from a relapse, unless there is an epic (read: 10% +) impulse movement from that level. “
Whales selling below all-time high is the main reason Bitcoin experiences tremendous volatility every time it approaches $ 19,500.
CryptoQuant CEO Ki Young Ju told Cointelegraph that whale inflows hit an eight-month high when BTC got close to $ 20,000. The combination of whales and miners selling heavily puts BTC at risk for a correction, Ju noted.
In the short term, according to Ki, this could mean Bitcoin could face weeks of sideways consolidation or a deeper correction. In addition, he added that foreign exchange reserves are not declining as they did in mid-2020. It shows that whales may be leaving BTC on exchanges to sell if Bitcoin’s price rises. He explained:
“If you look at the average entry level of all exchanges (144 block MA), it reached more than 2 BTC a few hours ago. We hit 2.5 BTC when the price hit $ 20k. It was the eight-month high since the big sell-off in March. Looking at the average outflow from all exchanges (72 hours MA), whales are no longer withdrawing from exchanges. They hold BTC on exchanges to make them available to sell I think. Looking at the Miners’ Position Index, miners are selling BTC quite heavily. “
The short term bullish case for Bitcoin
If Bitcoin moves above the sharply shorted resistance level of USD 19,500, buyers have a chance to regain control of the market.
A pseudonymous trader known as “CryptoCapo” said that “bears don’t want to see the price above $ 19,500,” while bulls don’t want the price to fall below $ 18,500.
Nevertheless, if the bulls prevail here, the near-term USD 20,000 level would be the next – and perhaps the most psychologically important – area to defend for the bears. Other traders, such as CryptoGainz, do the same said That $ 19,650 is the level that could trigger another breakout for Bitcoin in the near future.
Meanwhile, MicroStrategy, the $ 3 billion business intelligence conglomerate, has just bought an additional $ 50 million in Bitcoin at the current price level, which is yet another optimistic factor for Bitcoin.
MicroStrategy has purchased approximately 2,574 bitcoins for $ 50.0 million in cash in accordance with its Treasury Reserve policy, at an average price of approximately $ 19,427 per bitcoin. We now have about 40,824 bitcoins.https://t.co/nwZcM9zAXZ
– Michael Saylor (@michael_saylor) December 4, 2020
The publicly traded company first announced the purchase of $ 250 million worth of BTC as Cointelegraph on August 11 reported. In September, the company bought another $ 175 million in BTC, bringing BTC holdings to approximately 38,000 BTC. MicroStrategy doubling down on its purchase shows the company believes $ 19,000 could be a launch pad for Bitcoin’s next rally.
This news is also because Grayscale added thousands of Bitcoin to its holdings in December alone. Such as Cointelegraph reported Earlier this week, the Grayscale Bitcoin Trust bought 55,000 BTC in November, or double the total BTC mined that month.
Therefore, it remains to be seen whether this institutional purchase could offset bearish sales by whales and miners in the coming month.
The short term bearish case
Technically, the bearish scenario for Bitcoin is revolving around the USD 18,500 support level in the coming days. If BTC loses support and falls below USD 18,500, technical analysts say a bigger drop could occur. Below USD 18,500, the next major macro support area is the USD 16,000 to USD 16,500 range, which BTC tested on Nov. 26.
Michael van de Poppe, a full-time trader with the Amsterdam Stock Exchange, noted that Bitcoin falling below USD 18,500 would likely mean retesting the USD 16,000 support area. If BTC continues to be rejected by the USD 19,150 and USD 19,400 resistance levels, the chances of a decline will continue to rise.
Van de Poppe explained:
And since $ 19,400 and $ 19,150 were rejected, the lowest range tested in the $ 18,500 area, tweeted yesterday. All fine, range-bound construction beyond. Breaking $ 19,400 = New ATH. $ 18,500 losses = probably $ 16,000 tests. “
As a result, the futures market has shown trader uncertainty in recent days. Data from CryptoQuant shows that Bitcoin futures traders have used lower leverage of late. This indicates that traders are expecting large price swings and potentially steep sell-offs.
Analysts at CryptoQuant found it that open interest on Binance Futures is rising while the estimated leverage ratio decreases, suggesting that traders are becoming more cautious and uncertain about Bitcoin’s next move.
A variable that could trigger another BTC rally
Calls for a Bitcoin correction have increased, even from different permabulls. For example, Raoul Pal, Real Vision Group’s CEO, pointed out that engineers are suggesting that BTC is at risk of seeing a correction. The DeMark system shows Bitcoin’s daily chart is on track for a record 13 consecutive positive candles.
Bitcoin may be facing some serious technical advancements … the daily DeMark shows a cluster on 2 13’s and a 9 and another 13 can be placed tomorrow! pic.twitter.com/TNPpLfR2nH
– Raoul Pal (@RaoulGMI) December 4, 2020
But one variable that could potentially keep Bitcoin grinding upwards is the relative strength index (RSI) on the annual chart. Currently, Bitcoin’s RSI is hovering at 75, meaning it is not yet in overbought territory.
An asset is considered extreme bought when its RSI rises above 90. Given BTC’s overall momentum, besides increasing institutional interest, BTC bulls still have a good chance of breaking the key USD 19,500 and USD 20,000 resistances.