Bitcoin Faces Resistance at $40K, but Momentum Remains Intact
After Bitcoin (BTC) price rose over $40,000 for the first time more than six weeks on July 26, bull market confidence resurfaced in the cryptocurrency industry. Today’s rise to $40,581 was a resumption of the July 25 breakthrough, which witnessed the BTC price soaring to $48,110 on Binance after a short squeeze wiped over $500 million in short positions in a matter of only two minutes.
BTC surged to an intraday high of $40,581 on Monday before falling down to $37,500, according to CoinGecko data, as bulls attempt to turn this resistance zone into support in anticipation for a greater rise.
While the run higher gives the appearance of a trend shift, prompting some experts to declare the bull market has resumed, on-chain statistics and permanent funding costs do not completely support that argument. Specially because the recent breakthrough might have simply been the consequence of a huge short squeeze. As per Élie Le Rest, a partner at digital asset administration firm ExoAlpha, the latest debunked speculation that Amazon will accept cryptocurrency payments may have the same impact as PayPal’s announcement in 2020 that it would embed cryptos.
If the Amazon rumor is accurate, Le Rest believes it “may be the spark to start a bull market in H2 of 2021. Over a billion dollars of short positions got liquidated in the last 24 hours, with a major portion of the liquidation happening within an hour,” as per Le Rest, who also stated that “the latest market move could be prolonged throughout the week with order inflows coming from players who have been waiting for a clear trend to emerge with respect to Bitcoin since the final week of May.”
“To confirm this upward trend, Bitcoin must break above the $30,000-$40,000 area it remains locked in for the past two months,” Le Rest added. Sustaining Bitcoin’s price over $40,000 would indicate that the “bear market” has ended, and the bull market could restart. Furthermore, as per Le Rest, “provided Bitcoin maintains its upward thrust, as many predict, Bitcoin may get back on course with the Stock-to-Flow model and hit the $100,000 level by year-end.” Excessive bullishness should be avoided, as evidence from Glassnode shows that numerous bearish risks remain genuine.
When Glassnode looked at the futures markets’ trend, it discovered that “perpetual funding rates have remained negative,” indicating that “the net bias stays short Bitcoin.” “This indicator, specifically, assists us recognize that Monday’s price rebound is likely connected with a cumulative short squeeze, with funding rates trading at much more negative levels amid price soaring +30 percent,” Glassnode added. In comparison to the fluctuation in spot and futures markets, “the transaction volume and on-chain activity remained pretty calm,” according to Glassnode.
Consequently, how on-chain transfer traffic reacts to latest Bitcoin price movement will give us a clearer idea of where the market is going, but as Glassnode points out, “it needs to be seen if on-chain volumes begin to improve in reaction to latest wild price-activity.” The rise of Bitcoin over $40,000 sparked significant gains in other cryptocurrencies. Ether (ETH) increased by 11% to a day high of $2,433, while Dogecoin (DOGE) increased by 7% to $0.208. Strike (STRK) is up 64%, Venus (XVS) is up 55%, while VeChain Thor (VTHO) and Ankr are up 20% (ANKR).