Bitcoin Spikes Over Psychological Level of $10,000, but Fails to Sustain
Bitcoin (BTC) spiked to $10,272 earlier today, resulting in liquidation of $74 million worth long trades on BitMEX exchange itself. The spike caught many traders off guard.
There are two explanations for the spike from $9,700 to $10,200. First obvious reason is short-covering of positions by traders, while the second one is booking profit from extended rally of altcoins.
Notably, as Bitcoin started rallying, top altcoins and DeFi tokens, which had performed well recently, began to decline. Specifically, Ether dropped from $322 to $311. During the same period, DeFi tokens such as YFI and Aave fell sharply.
The concurrent rejection of top altcoins and rally in the price of Bitcoin indicates that traders made profit from altcoin rallies in recent months. As traders churned their portfolio by shifting from altcoin to Bitcoin, the price of Bitcoin began to increase, while that of altcoins fell.
ETH, for illustration, increased from $247 on July 23 to $322 yesterday, mirroring a 30% appreciation. In spite of the bullish view on altcoins, investors are likely taking a measured move by offsetting their profits.
The moment Bitcoin crossed above $10,000, a wave of highly leveraged short contracts became liquidated. When BTC hit $10,200 it triggered a series of liquidations worth $74 million.
Bitcoin has gone through several stages when short or long positions worth over $50 million get liquidated. However, for this to happen within an extremely short span of time, say one hour, is not a usual scenario.
Are you ready?
— Barry Silbert (@barrysilbert) July 25, 2020
Mass liquidations of long contracts at $10,000 levelss also indicate that the $10,000-$20,000 continues to act as huge resistance zone. The moment Bitcoin crossed, $10,200 a flurry of sell orders rushed in, pushing the numero uno crypto to below $10,000, making the rally short-lived.
As Bitcoin rebounded sharply in the past few weeks, some crypto analysts and investors have turned bullish towards BTC and also ETH. When Ether breached $280, Grayscale CEO Barry Silbert tweeted “Are you ready?”
That is actually where my head is. Massive symmetrical triangle in $BTC points to ATHs, then $50k
— Peter Brandt (@PeterLBrandt) July 25, 2020
In the meantime, popular trader Peter Brandt anticipates Bitcoin to reach a new high of $50,000 soon. He said:
“That is actually where my head is. Massive symmetrical triangle in $BTC points to ATHs, then $50k.”
However, some factors could impact the near-term price trend of Bitcoin. Initially, the financing rate of Bitcoin is forecast to be more than 0.04% on BitMEX. That is 4x greater than the average financing rate of 0.01%. It spells that a major portion of the market is going long.
In case of Ethereum’s native crypto Ether (ETH), the financing rate oscillates at more than 0.1%, which indicates that the rally has just begun. In February, sellers dominated when ETH hit a price of $280 as its financing rate exceeded 0.2% and when the astounding majority of participants had a long position in the asset.
Secondly, the price level of $10,000 continues to act as a prime psychological barrier for Bitcoin since last October. Bitcoin, which has reversed to $9,895 at the time of writing this article, was unable to break above February 2020 level of $10,473.
Even though, it would be an exaggeration to refer the spike as lower high formation, it could assist in explaining the fact that Bitcoin is still trades in multi-month price range.