As an analyst with over two decades of experience in the financial markets, I find myself both excited and cautious about Bitcoin’s current rally. The price surge to $67,953 is indeed impressive, marking a new high since July 31. However, my years of observing market trends have taught me that every rise has its own unique dynamics.
Bitcoin’s price is approaching a daily closing record since July 31st, having touched an intraday peak at $67,953. This latest surge marks a new high point in comparison to its previous local top of $66,450 from September 27th, which represents the third higher high in Bitcoin’s recent trend.
On October 15, there was a 6.17% increase, indicating growing anticipation that the market may reach the $70,000 mark for the first time in the second half of 2024.
Bitcoin’s apparent returns to Q1 levels
One key observation of the ongoing rally is the lack of Bitcoin demand from retail. Crypto Rover, Founder of Cryptosea, highlights the fact that Bitcoin is near its all-time high, but “retail interest is close to zero.”
Ki Young Ju, CEO of CryptoQuant, mentions that Bitcoin’s apparent demand is starting to increase.
As explained by Young-Ju, the perceived demand for Bitcoin is a crucial factor that is calculated by subtracting the additions to the supply from long-term storage (coins not active for more than a year) from the amount newly issued through mining.
If the creation of new Bitcoins is less than what’s being taken out of circulation, this suggests a growing interest in Bitcoin because people are holding onto it more. On the other hand, when the production of new Bitcoins exceeds the reduction in supply, it might indicate a potential decrease in demand since fewer people seem to be interested in acquiring it.
Since 2016, Bitcoin’s demand has consistently risen preceding major price surges. Currently, the observed demand resembles that seen in February 2024, following which Bitcoin reached its peak price of $73,800 in March.
Bitcoin purchasing demand rises by 3%
Axel Adler Jr, a researcher specializing in Bitcoin’s on-chain activity, emphasizes a parallel behavior among investors. In a recent post, he points out this observation.
“Demand for coin purchases from new investors has resumed, with a 3% increase over the last 10 days. This is a positive signal for the market.”
It was observed that both Coinbase (an American company) and the Kimchi premium (a Korean term) showed an increase, suggesting that individual investors in the United States and South Korea are becoming more interested in purchasing Bitcoin. An increasing Coinbase premium signifies growing demand from the U.S. retail market, while a rising Kimchi premium indicates interest from Korean retail investors.
It’s worth pointing out that despite this, the total cost for both indexes continues to show a loss. Hansolar, an expert in blockchain analysis, suggests that periods like these could be classified as a ‘doubt’ rally, where Bitcoin’s price on exchanges appears to be underpriced or a ‘discounted rate’ before its substantial increase in value.
Bitcoin’s leverage-driven rally is “highly risky”
Over the past few days, the demand for Bitcoin’s spot market has noticeably improved, but the recent surge can largely be attributed to the derivatives market. Last weekend saw an increase of around $800 million in open interest in the derivatives market, which coincided with BTC prices reaching $64,500. However, as the week unfolded, the price dropped rapidly, forming a low just under $60,000.
Over the weekend, a similar pattern has repeated itself. Prices have climbed by 10% since October 11th, yet open interest has increased nearly 18%. This trend has prompted Maartunn, a market analyst, to exercise caution, indicating that last week’s drop may have been caused by excessive leveraging.
Furthermore, the Bitcoin heating chart by Capriole Investments appears to share a comparable perspective regarding the futures market.
For the first time in 2024, the indicator exceeds the red line representing the overheating threshold. This suggests a strong sentiment of greed or bearishness among investors, accompanied by heavily leveraged positions. Consequently, it’s likely that the leverage market requires a significant adjustment soon.
Bitcoin faces key resistance at $68,000
In less than a week’s time, there’s a possibility that Bitcoin could surpass the significant figure of $70,000.
Even though the resistance level at $68,000 may need some time to transform into support, a substantial supply area persists between $67,000 and $68,300 for Bitcoin. If we revisit this range, it will also challenge the downward trendline that’s been in effect since March 2024.
From my analysis, I noticed that Bitcoin‘s price moved into the supply zone on October 15. However, as of now, we’re witnessing a significant downward adjustment following a test of its price range. Interestingly, this correction occurred shortly after the price encountered resistance at the descending trendline.
From my research perspective, I’ve noticed that since our initial HH1 (higher high) formation in August, every subsequent HH has been preceded by a corrective phase. Consequently, given the current market dynamics, I speculate that Bitcoin might find it challenging to surpass $70,000 this week. However, if it manages to close a daily position above $68,300 in the coming days, there’s a possibility that it could break through that resistance level.
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2024-10-15 19:20