Bitcoin Undergoes Price Correction on News of Miner Outflow Reaching 5-Month High
Bitcoin’s (BTC) price fell from $10,580 to a low of $10,258 a few hours back, reflecting a drop of 3% in a matter 6 hours after on-chain data signaled the likelihood of a miner sell off.
At the time of writing this article, Bitcoin was trading at $10,347. All through last week, on chain analysts have stated that miners have been disposing comparatively huge quantity of BTC.
Other than cryptocurrency exchanges, miners are regarded as formidable in terms of their selling pressure. Therefore, transfer of Bitcoin by miners is closely monitored as it can cause huge downward pressure on price.
Many reports a week back suggested that miners are moving Bitcoins out of their ecosystems. Ki Young-Ju, the CEO of the analysis company, said:
“As I know, some Chinese miners already realize their mining profitability (return on investment), and they might not want new mining competitors joining the industry because of the bull market.”
In the meantime, as per Glassnode, an indicator that reveals the capital inflow from miners to exchanges just shot up to a five month peak. The earlier surge was seen in mid-August when Bitcoin price reached its 2020 peak of more than $12,000, which was quickly followed by a reversal towards $10,000.
Usual sell offs enable miners to cover costs involved in running huge mining facilities. Glassnode stated:
Previous 5-month high of 44.479 BTC was observed on 14 August 2020
— glassnode alerts (@glassnodealerts) September 13, 2020
If Bitcoin rebounds quickly from reversals sparked by miners sell off, it would signal considerable demand from retail investors trading on exchanges. On the contrary, if Bitcoin continues to decrease, it would indicate that there is not adequate demand to nullify the selling pressure. In the near-term, traders are slightly cautiously bullish in spite of the resistance faced by Bitcoin at the $10,500 zone.
The trader has opined that breaching such a key resistance level at the first instance is unrealistic. A minor resistance is also possible considering the historical importance of the level. A pseudonymous trader referred to as “Byzantine General” stated that near-term liquidations of contract happened after the bounceback to $10,500. In the days ahead, the trader anticipates a bounceback or small decline to $10,100, detailing:
As usual, liquidity levels is where it’s at.
Liqs get taken, price dumps.
— Byzantine General (@ByzGeneral) September 13, 2020
Scott Melker, a renowned crypto trader, stated that the $10,500 level is a key resistance for Bitcoin. Taking into account the importance of the resistance level, the trader stated that it is not possible to lead to notable reversal. Melker stated:
Don’t expect a major resistance to be broken on the first test. Also, don’t expect the first rejection to lead to an epic dump. $BTC
— The Wolf Of All Streets (@scottmelker) September 13, 2020
In the meantime, in the recent technical analysis pertaining to Bitcoin, trader Michael van de Poppe has underlined the level as a crucial resistance to be broken in the near-term. Nevertheless for the bullish trend to continue, earlier resistance levels must be piloted and affirmed as fresh support before going higher, he details:
Van de Poppe said “On the upside, if the price of Bitcoin breaks through the $10,450 level, the potential and crucial pivot is structured between $10,900-11,000.”