Is Bitcoin Still Facing a Real Threat of a Sharp Market Correction?
This week, the price of bitcoin is slowly making its way downwards that had us going back below $9,000.
Last night, we went as low as $8,800. Currently, BTC/USD is trading around $9,150 while managing $2.75 billion worth of “real” daily volume.
Interestingly, the futures curve remains in contango, suggesting leverage demand is still in play but modestly.
When it comes to options, which has been seeing record volume for the past few weeks, it is showing “an overextension in terms of bear positioning.”
“Either this is a very crowded trade which is due for an aggressive unwind or there is a real threat of a sharp market correction,” said Denis Vinokourov of Bequant.
Resistance & Support
The drop in price has been despite the supply of bitcoin on cryptocurrency exchanges currently at 2-year low levels. This fall was accelerated after the March sell-off.
From the high of 261,000 BTC six months ago, the exchange wallets’ BTC balance is currently at 95,000.
The supply of bitcoin outside exchanges meanwhile has been “conversely and predictably continued to rise over time,” noted Santiment.
As per the In/Out of the Money Around Current Price indicator, about 2.4 million addresses are pushing back on bitcoin, keeping it from passing $9,600.
The largest level of resistance for BTC is located between $9,346 and $9,616, where 1.54 million addresses previously bought 994,000 BTC.
As for support, there are about a million addresses holding 593,000 BTC between $8,756 and $9,056. The next level of support is around $8,654 where another 1 million addresses are holding 625,000 BTC, as per IntoTheblock.
Going much lower at $6,300, about 3.7 million addresses bought more than 2 million BTC, as such a big wall of support for the world’s leading cryptocurrency.
$10,000 or $8,500?
Currently, we are sitting at the top of a long-standing wide range, wrote analyst Mati Greenspan in his daily newsletter. The bottom of this range could still be $6,000 or even $4,000, he said.
Given this uncertainty in the market, he has reduced his exposure to cryptocurrencies and moved to cash.
However, we have come a long way and are up 137% from March sell-off and up 24% YTD.
As such, the crypto market is still feeling pretty confident in not seeing a deep retrace and will continue its way upwards from here.
“If the long term trend and price action holds for bitcoin this upcoming Cycle Low in May likely to be the last 4digit low. Mid $7k would be good,” said analyst Bob Loukas. “$8,500 seems to be next support.”
— IncomeSharks (@IncomeSharks) May 21, 2020
Similar thoughts are shared by analyst REKT Capital who said even if bitcoin crumbles all the way down to $8,500 but rebounds above $9,000 within the next few days, it would be all good.
“As long as BTC Weekly closes above $9000, price would still look promising on the Weekly timeframe,” he said.
Testing the support level here (might wick to $9,100), after breaking below the rising wedge structure.
Holding here and we can test the range highs again.
If Bitcoin can't, I'm assuming the $8,200-8,500 level to be tested as support next. pic.twitter.com/HjXnGNThqp
— Crypto Michaël (@CryptoMichNL) May 21, 2020
As per Dave the Wave’s poll’s results, the majority — 66.3% of 1,604 voters also expect “more consolidation” on the way before the digital asset could jump higher.