Driven by Real Demand Bitcoin Hits Resistance but Retail and Speculator Euphoria Is Not Here Yet
Technical obstacles are here with consolidation expected around $51,000 while the possibility of Fed tapering risk has been pushed back has greenback falling and US dollar net longs declining by more than half.
Bitcoin has finally hit $50,000 after three months.
As of writing, the leading cryptocurrency is trading just under $50k, finding resistance at this psychologically important level.
“We’re seeing some very bullish signs here,” said Vijay Ayyar, head of Asia-Pacific with crypto exchange Luno in Singapore. Bitcoin could “test all-time highs again” after pushing past levels that have seen some major challenges.
The rally is now overcoming a confluence of hurdles, including a Fibonacci and Ichimoku cluster between $47k and $48k. Besides $50k being a round number, the 61.8% Fibonacci retracement of the April to June downtrend presents a potential obstacle at $51,000.
“The next major resistance, for now, is at the $50,000 zone,” said Konstantin Anissimov, executive director at CEX.IO crypto exchange.
“Should more buyers dive in to push the price above the $50,000 level, a frenzy may be ushered in to steer the price toward a medium-term target of $55,000.”
Appetite Must Remain Intact
As Bitcoin’s market cap inches closer to $1 trillion, the total cryptocurrency market capitalization is currently at $2.23 trillion, fast approaching the mid-May peak of $2.6 trillion propelled by the gains of AVAX, LUNA, RUNE, AR, SOL, and ADA in the last 30-days.
The latest uptrend is marking the end of a months-long slump after crypto-assets peaked in April and May, driven by profit-taking and China’s crackdown on cryptocurrency mining and leveraged trading.
According to Edward Moya, senior market analyst at OANDA in New York, the fears of capital gains taxation have led some traders to hold cryptocurrency as a long-term investment as well.
“New investors are the key to this latest bitcoin rally, and all signs show they are comfortable with high risk.”
“Bitcoin could see a fast appreciation here and might not hesitate making a run for $60,000 if appetite for risky assets remain intact.”
USD Giving Back Its Gains
Investors are also betting on the prospect of more US stimulus spending that would lead to further gains amidst the growing adoption of cryptocurrency among mainstream financial services firms.
With Dallas Federal Reserve President Robert Kaplan, a well-known hawk, saying he might reconsider the need for an early start to tapering as concerns over the outlook for global growth due to the Delta coronavirus variant, USD slipped on Monday.
The greenback saw some profit-taking after registering its biggest weekly rise in over two months, currently around 93 after climbing to Nov. 2020 levels on Friday.
Last week, US dollar net longs also declined to $1.06 bln, from $3.08 bln in the previous week after the USD positioning was net long for five straight weeks, which came after staying net short for 16-long months.
Markets are expected to experience some volatility in the coming days, with Fed Chair Jerome Powell to speak about the economic outlook at the central bank's Jackson Hole Aug.26-28 conference.
Tapering Pushed Back
The possibility of Fed tapering risk pushed from Sept. to December has QCP Capital maintaining a bullish bias against the 40k support level in BTC. Also, Governor Lael Brainard's latest dovish pivot to become Fed chair is “likely to raise enough questions within the FOMC to delay their decision by a quarter.”
Not only is headline regulatory risk exhausted in the near-term, the funding rates in perpetual swaps and premium in the futures is also low and muted, meaning “most of the rally has been driven by demand in physical spot rather than from leveraged speculators.”
With no signs of overheating or overextension, QCP is bullish but not overly so due to GBTC still trading at a discount. In the meantime, consolidation is expected at $51,110.
However, NFTs are drawing the attention of retail and institutions alike. And as retail investors return to the market, another upswing could see crypto prices rallying to new heights.
Given the fact that the last time BTC was at $50k, the Google trends for Bitcoin searches were much higher than what it is right now, “this suggests that retail euphoria hasn’t entered the market yet, and bitcoin has a long way to go in this market cycle,” said Marcus Sotiriou, a sales trader at the UK based digital asset broker GlobalBlock, in a note.