Bitcoin (BTC) ranged from $ 9,800 to $ 10,500 in a week after falling slightly from almost $ 12,100 on September 1st. While BTC is struggling to show any clear price movement, traders are generally skeptical.
In the medium to long term, traders expect Bitcoin to recover and perceive the current phase of consolidation as a healthy decline. Between July 16 and August 17, the Bitcoin price of Coinbase increased from $ 9,005 to $ 12,486, and a repayment may be said to be necessary to neutralize the futures market.
Most of the daily bitcoin volume comes from the futures market. Cryptocurrency futures exchanges use a mechanism called “financing” to balance the bitcoin market. This mechanism forces holders of long-term contracts to compensate card sellers for part of their positions if the market is long, and vice versa.
Usually, when Bitcoin’s rally becomes excessive, it will overflow the futures market and raise funding rates. During a downturn, this helps stabilize financing rates, which reduces the likelihood of long or short-term pressure.
Explanation of Bitcoin’s downward trend in the short term
Speaking to Cointelegraph, Dennis Vinokurov, Head of Cryptocurrency Exchange and Institutional Brokerage Provider BeQuant, and Jay Hirsch, CEO of eToro Brokerage and Brokerage, revealed that Bitcoin’s prospects are positive in the medium term due to several basic and technical factors.
After Bitcoin fell to $ 12,000, analysts attributed the decline in BTC to several factors. As Vinokurov noted, “A sharp pullback from overcrowded positions related to DeFi assets could have contributed to the decline. However, other factors such as whales collecting profits, miners selling their hiding places and South Korea’s main stock exchange Bithumb, have been raided in the past. Police, they can all put pressure on Bitcoin. Hirsch emphasized that in periods of low volatility, price falls can increase when there are fewer traders in the market:
Mining is moving higher than normal Bitcoin volumes to stock exchanges as they seek to cover their fixed expenses, and investors have been more conservative lately (even in the usual summer silence). Smaller trading volume means volatility, and the fall in prices can be steeper than usual. During heavy trading sessions. ”
Vinokurov mentioned that the decline could benefit Bitcoin in the coming months, as price deviations are not a negative event if the market calms down as a result. He also indicated that the influx of delivered traders and speculative traders will continue after a period of consolidation:
“Finding and consolidating prices after a strong rally is a sign of a healthy two-way market movement. Rejection of the price is not necessarily a bad thing, as it gives market participants the opportunity to assess the situation and achieve compliance with the interests of both the attracted / speculative stream and the long-term interests of shareholders. ”
Long-term Bitcoin predictions
As the last quarter of 2020 approaches, analysts remain neutral or optimistic about price movements in bitcoin, and a number of technical and fundamental factors may increase the BTC sentiment from November to December. Historically, BTC has performed well in the last two months of the year. In particular, Bitcoin climbed to a new full-time high in December 2017.
Possible technical triggers include closing the monthly Bitcoin light above $ 11,600 for the first time since 2017 and hitting the resistance level of $ 12,000. However, it showed a significant breakout for a while, after falling to $ 3596 on BitMEX in March 2020 .