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The price of Bitcoin (BTC) is showing signs of a renewed rally as it breaks the USD 40,000 resistance area. There is a combination of optimistic data points on the chain and a favorable market structure that prompts analysts and traders to anticipate an impending Bitcoin breakout to a new record.

In the near term, the USD 38,000 and USD 40,000 levels remain the biggest hurdles for Bitcoin. The longer it took for BTC to reach $ 40,000, the greater the chance of a possible correction. So it is critical for Bitcoin to pass the USD 40,000 level and stay above it for the foreseeable future. Bitcoin has already spent nearly three weeks below USD 38,000, stagnating the price cycle and losing momentum in the near term. On February 6, Bitcoin finally broke out of the USD 38,000 level and established as a support level.

A positive data point in the chain that increases the likelihood of a Bitcoin outbreak is the increase in whale addresses. Analysts at Santiment said that Bitcoin whales have continued to accumulate despite the rise in the price of the asset: “ The #Bitcoin whales (1,000+ $ BTC addresses) have not stopped accumulating, while the middle class traders (10-1,000 $ BTC) I have not stopped taking profits because the price is hovering around $ 38,000. In the meantime, the small addresses # FOMO’ing are back in soon! “

Bitcoin’s accumulation by whales coincides with large outflows from Coinbase, typically indicating that wealthy investors are buying Bitcoin. A pseudonymous trader on Twitter known as Johnny stated: “It is a coincidence that we have seen huge amounts of $ BTC withdrawn from Coinbase. The first bull market correction in 2021 is now complete. “

Scott Melker, a cryptocurrency trader, noted that on top of the optimistic on-chain data and fundamentals, Bitcoin shows a favorable technical market structure. He explained that Bitcoin sees a “huge bull flag” structure, which, if played out, could cause BTC to reach $ 63,000 in the foreseeable future: to $ 63,000., ”Expressed optimism about Bitcoin’s short-term price cycle.

What about Bitcoin in the short term?

Guy Hirsch, US general manager at the social trading platform eToro, told Cointelegraph that there is capital rotation going on from Bitcoin to decentralized finance and other altcoins. The market has become completely risky as DeFi related tokens are up 30% -100% in one day. The hunger for altcoins, seen as higher risk, higher return bets, has slowed Bitcoin’s momentum.

Hirsch noted, however, that long-term sentiment for Bitcoin is still bullish. He explained that Bitcoin was range bound for a while, meaning it was trading in a tight range. This would change if the price of Bitcoin exceeded $ 40,000, Hirsch said, as this would cause interest in Bitcoin to rise in a short period of time. Based on the options market data, Hirsch said there is a lot of outstanding interest of $ 52,000 and $ 56,000 where Bitcoin could go. He added:

“I would be surprised if Bitcoin doesn’t rise above $ 40,000 in the coming months. Support levels have not really been set for that price as it is only traded there for a very short time. However, options positioning can be a good place to look when trying to understand where professional traders see the markets move. “

Bitcoin stagnated over the past week as the decentralized financial market outperformed major cryptocurrencies, including Bitcoin and Ether (ETH). Hirsch said many investors, including institutions, saw opportunities for more profitable play in the DeFi market. As a result, he said Bitcoin’s profits were turned into altcoins, triggering an ‘alt season’. In the long run, however, Hirsch thinks profits will likely flow back to Bitcoin, explaining:

“This capital spin, often referred to as ‘alt season’, often occurs in the wake of Bitcoin’s hitting new highs and is often followed by a sell-off of these assets back to BTC. Short-term sentiment is neutral, which has recently been reflected in Bitcoin trading, which is mostly range-bound; but long-term sentiment is still optimistic, as shown by PayPal’s admission during this week’s earnings call that they were surprised by the number of crypto asset transactions on their platform. “

Streets forecast a clean break of $ 40,000

Investors, researchers, and strategists at Bequant, Lmax Digital and CrossTower told Cointelegraph that they expect Bitcoin to likely successfully climb above $ 40,000, as did the explosive surge in demand in December 2020. They believe Bitcoin’s recent consolidation will not weakness in its price. trend.

Denis Vinokourov, head of research at Bequant crypto trading and brokerage platform, said that BTC that remained below $ 38,000 for a long period of time showed “efficient pricing” leading to a “sharp turnaround in the past due to lack of pricing information.” added that once the USD 40,000 level breaks, what happens next will be difficult to predict:

“There is little information to continue as the previous highs are the natural starting level. But after that anything is possible, and the next move is a mystery to everyone. “

Chad Steinglass, head of trade at the CrossTower crypto investment platform, said if Bitcoin crosses $ 40,000, it will see an explosive upward movement. Bitcoin saw a similar scenario play out in December 2020, when it struggled to break out of $ 30,000. Once it did that, it saw a fairly rapid move to its all-time high of $ 42,000. According to him:

“If new investment demand can eat through this wall of sales interest, and Bitcoin breaks 40K again, and especially if it hits new all-time highs, I expect the volume from these risk-reducing sellers to evaporate quickly, and that could pave the way for another. leg higher. “

Joel Kruger, a cryptocurrency strategist at the institutional crypto exchange Lmax Digital, believes Bitcoin could rise to the $ 40,000 level, providing a more ‘meaningful’ area of ​​resistance. He noted that the “current price action is indicative of consolidation in the wake of a major rally,” stressing that consolidation is healthy for Bitcoin.

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However, he was more cautious about predicting Bitcoin’s continued upward movement after it crossed the $ 40,000 mark, saying that “we don’t believe the market should expect a meaningful bullish continuation beyond $ 40,000.” According to him, “weekly and monthly technical studies are still following in heavily bought territory”, suggesting that BTC is entering risky territory.