Bitcoin price stuck at $32,000-35,000: The likely results of BTC’s ‘ladder’ drop
30. June 2021
Since Bitcoin ranges from $32,000 to $35,500, traders and technical analysts discuss what can come next for BTC.
In the short term, the crucial technical resistance level is $35,500. Over the last 24 hours, Bitcoin has continually rejected that level. When Bitcoin climbed to around $35,500 at Binance on January 13, it saw an 8% drop soon after, indicating that there’s strong selling pressure.
A pseudonymous trader known as “Byzantine General” noted that there are additional sell orders on Coinbase in the $36,500 to $37,000 range, saying “I’m not taking positions yet” and adding that he is “casually buying Dips in the spot market. There is significant uncertainty in the market due to the large price changes between $31,000 and $35,000 with no breakouts or downgrades. The trader also noted that Bitcoin is currently at the “VWAP” resistance, with high selling pressure at key resistance levels.
The price of Bitcoin (BTC) ranges between $32,000 and $35,000 after the big ladder drop on January 12. Traders remain mixed around the short term trajectory of BTC due to several contradictory signals. Some are up due to the rapid recovery of the $30,500 and Grayscale’s reopening of its products to new investors. Others are cautious due to continued rejection in the $35,000 to $36,000 resistance range.
However, general sentiment around Bitcoin has been increasingly positive in the last 24 hours. The rapid correction from $41,000 to $30,500 liquidated many over-leveraged buyers and long contracts. Before the correction, Bitcoin’s futures funding rate was around 0.1% most of the time, which means that the market was significantly over-leveraged and overwhelmingly bullish.
The eternal dilemma: Should I buy now or wait for a correction?
The futures funding rate is a mechanism that balances the market by rewarding buyers when the market is mostly short and sellers when the market is mostly bullish. In the Bitcoin futures market, the average funding rate is 0.01%. This means that long contract holders have to pay 0.01% of their position every eight hours to their short selling counterpart. Because the market was overleveraged for so long, when the first big drop occurred, the price of Bitcoin began to plummet as consecutive settlements took place.
After the fall, the futures market has warmed up much less, and most derivatives have normalized after seeing an increase in interest. Although open interest in the Bitcoin futures market is still close to its historical high, the market is healthier than before. This increases the likelihood of a new rally in the foreseeable future.
The positive macro narratives surrounding Bitcoin
According to Ki Young Ju, CEO of the CryptoQuant business data platform, many institutional investors bought Bitcoin for the $30,000. Therefore, if the price of Bitcoin falls into the support range of $30,000 to $32,000, institutions will probably protect that level with large purchase orders. This is the main reason why Bitcoin saw a big reaction from buyers of Coinbase and other major US exchanges when it fell to $30,500 on January 12. “Coinbase’s Jan. 2 outflow was the highest in three years,” Ju wrote. “Speculative assumption, but if these guys are behind this run, they will protect the 30k level. Even if we have a drop, it would not go below 28k.
As for the likelihood of a prolonged whale accumulation in the $30,000, there are two key macro-narratives that could encourage sentiment around Bitcoin. First, several major media publications have reported that U.S. President-elect Joe Biden is expected to appoint Gary Gensler as SEC Chairman. Gensler previously taught a course on “Blockchain and Money”, which has since been posted for free on the MIT OpenCourseWare. Considering this, Mechanism Capital’s partner, Andrew Kang, said that “the probability of approval of a #BTC ETF just went up significantly.