At last, you can close CoinMarketCap, take a break from Crypto Twitter, and get off TradingView — Bitcoin (BTC) has finally downed a chill pill, albeit begrudgingly. Since peaking at $7,550 on Saturday, the cryptocurrency has fallen to $7,000 and has set up shop there for the time being.
. @bitfinex is able to raise 1b USDt in 10 days, in a private sale. Private companies, giants in our industry and outside, made investments for > 100m each. A legion of inside and outside users made investments for > 1m each.
— Paolo Ardoino 🍐 (@paoloardoino) May 13, 2019
But, as Bitfinex CTO Paolo Ardoino announced the successful $1 billion fundraising of Bitfinex, the bitcoin price spiked from $7,000 to $7,300 within minutes by more than 4 percent.
Related Reading: Bitcoin Volume on BitMEX Skyrockets to Staggering $10 Billion as BTC Hits 2019 High
Bitcoin Surge Puts Bears On The Back Foot
Not one week ago, Bitcoin was sitting at a cool $6,000, showing no inclination as to where it was going to move next. In fact, some were postulating that the cryptocurrency market had topped there, citing technical indicators that were screaming “oversold, oversold” at the top of their proverbial lungs.
Yet, as we now know, this was far from the truth. In the three days that followed the rally past $6,000, BTC popped to $6,400. Then when the weekend hit, the cryptocurrency market absolutely popped, pushing past resistances like they were soggy pieces of paper. As Nik Patel, the known author of crypto trading primer “An Altcoin Trader’s Handbook”, explained in a recent market update, “Bitcoin[‘s price action last week] has blown all expectations of bears and bulls alike out of the water.” Well put, Patel.
As aforementioned and you well know, BTC tapped $7,500 on Sunday but has since fallen back to more “organic” levels. The asset saat at $7,000, and awaits the opening bell of Wall Street on Monday morn. So what’s next for the cryptocurrency?
According to analyst Josh Rager, Bitcoin’s price action over the past five weeks is eerily similar to that seen during the end of the previous bear market. For those unaware, in 2015, BTC fell to $200 in a capitulation event, rallied to $500 in a parabolic run-up, fell to $300 in a 40% correction, and then decidedly entered a bull market phase.
With this in mind and barring that BTC breaks from a historical trend, the asset may have been vulnerable to a further ~25% fall from current levels, potentially finding a local bottom in the low-$5,000s or even the high-$4,000s. This expectation for a healthy pullback has been echoed by other traders, many of which state that buying BTC at current levels may be foolish and crass, given the Bitfinex situation.
https://twitter.com/Josh_Rager/status/1127542528083992576
What corroborates the theory that BTC has topped is that shorts have already squeezed, decreasing the chances for a bullish continuation. As researcher Willy Woo pointed out on Sunday morning, much of the rally from $6,500 to $7,500 correlated with rapid decreases in the amount of BTC open in shorts on Bitfinex and BitMEX. There remain a large amount of shorts open on the two aforementioned platforms, but the high-leverage positions have likely already bitten the dust.
Related Reading: Despite Crypto Comeback, Prominent Investor Doesn’t Expect Ethereum 2.0 Until 2021
And, most importantly, the textbook trend that Bitcoin has been following for the past eight months is indicating that a strong pullback is likely. Crypto trader B.Biddles, who was the first to notice the following trend, noted in March that BTC’s 15-minute chart looked eerily like a textbook bump-and-run reversal bottom (BARR) pattern. For those unaware, a BARR bottom is when an asset capitulates, tests a descending trend line, and then breaks above it to rally out of the bear market.
Lo and behold, BTC followed the chart to a tee. Yet that same pattern now predicts that the asset will see a drawdown, before likely entering a secondary phase of accumulation or a newfangled bull run.
Fundamental Outlook For Crypto
Some, however, have claimed that market dynamics are entirely different this time around, meaning that Bitcoin could continue higher in the coming weeks.
Firstly, volumes with this move reached fresh highs. CoinMarketCap’s (manipulated) 24-hour volume indicator read $95 billion just hours ago, while Bitwise’s Bitcoin volume indicator reached $2.5 billion during the peak of Sunday’s trading session. Such volumes are evidently jaw-dropping and show that anything really is possible from here.
And secondly, there are a number of clear fundamental catalysts, in the form of news events, that could be massive drivers for price. Most notably, Fidelity Investments is soon expected to launch a Bitcoin trade execution service for its 20,000+ institutional clients, a purported 50% of which believe that cryptocurrencies have a home in their respective portfolios; and brokerage giants TD Ameritrade and E*Trade are soon expected to offer a similar service, but on the retail side.
With large players in the cryptocurrency market likely “front running” the fundamentals catalysts, as renowned analyst Alex Krüger suggested in a recent tweetstorm, a move higher on a further influx of good news is entirely possible.
What motivated these buyers? Possibilities:
– Front-running Fidelity/Bakkt/Ameritrade/Etrade flows
– Front-running news
– Coordinated buying
– Something else (as always)
– Combination of all of the above— Alex Krüger (@krugermacro) May 12, 2019
Featured Image from Shutterstock. Charts Courtesy of TradingView.