Bitcoin price hit a new permanent high of $ 35,776 on Binance on January 6. Following the explosive growth of bitcoin (BTC), network analysts are generally optimistic about the short-term rate. While many agree that the rally is starting to show signs of overbought, overbought has not yet occurred.
The main catalyst for Bitcoin’s strong growth has been the continued surge in demand for Coinbase. Over the past week, Coinbase, the largest cryptocurrency exchange in the United States, has received bonuses of around $ 100. This means that compared to Binance and other major exchanges, Bitcoin is trading at a higher price on Coinbase. This could indicate an increased demand for bitcoin from wealthy investors and possibly organizations.
Bitcoin surged overnight, gaining 10% in just 10 hours. Following the most recent rally, analysts on the chain said that BTC likely has room for further development, given that various indicators in the chain indicate that the market could get warmer if it follows previous bullish cycles.
Short Term Bitcoin Nonsense
Willie Wu, serial analyst and founder of Woobull, said the ongoing Bitcoin rally is “hot” but not yet warmed up. Wu offered a price chart for Bitcoin or NVT network transactions with a prize, and stressed that the current rally has the firepower for a new move based on previous peaks in 2013 and 2017.
Bitcoin NVT is measured by dividing the market value of Bitcoin by the daily volume of transactions processed on the blockchain in USD. The indicator is commonly used to determine if Bitcoin is overvalued or undervalued at a particular point in time. Wu said that the high speculative premium in the spot market, driven by real buying demand, is another sign that the rally hasn’t been hectic yet:
“This is the amount of the ‘speculative premium’ we have now compared to similar phases in the former beef markets. […] A higher-than-usual speculative premium was seen in 2018-2019 when BitMEX spearheaded the rise in derivatives dominance, which was later tamed by immediate dominance when it led Michael Saylor into an immediate buy. ”
Glassnode analysts found that the MVRV Z-Score is pointing to the same levels seen in the 2017 bull market. The MVRV indicator is commonly used to assess whether Bitcoin is overvalued relative to its “fair value”. If the market value of Bitcoin is much higher than the realized value, which is the BTC valuation calculated based on where investors buy, it has historically recorded its maximum rally.
Currently, the Bitcoin MVRV Z-Score is still far from the peak of the market compared to 2017. Analysts at Glassnode explained that the MVRV Z-Score reached five and is now “a key moment for the 2017 bull market.” But analysts also point out that “in 2017, BTC earned another $ 10 10 times in 6 months.” Thus, both MVRV Z-Score and Bitcoin NVT show that BTC has the potential for more growth in the foreseeable future.
Cryptocurrency analyst Alex Saunders also pointed out that Bitcoin and Ether (ETH) volume on PayPal has hit a new high of $ 110 million. While Google Trends data shows retail demand is not on par with 2017, it is still high on PayPal:
“Retail demand is skyrocketing compared to USD-denominated BTC and ETH, and PayPal is close to hitting its highest daily volume of $ 110 million. The public is catching the monetary error through the wizarding Internet, just as the wave of institutional money begins to pour in. ”
A bearish scenario for Bitcoin in the short term
Finally, this scenario reverts to two simple factors: successive liquidations and a slowdown in institutional accumulation. The bitcoin futures market has hit a consistent high of open interest rates at over $ 11 billion. This means that more traders are betting on the bitcoin price than ever before.
When open interest in the futures market is high, the likelihood of long or short pressure increases. Long-term pressures arise when long-term contracts or buyers are forced to sell their market positions if the bitcoin price drops sharply. They are under pressure because they are borrowing capital to trade bitcoin. When the price of bitcoins falls to a certain extent, their positions are liquidated, which becomes selling pressure.
The problem arises when these filters appear one after the other and call the chain. For example, $ 33,000 is the liquidation limit for long contracts with 10x leverage. If the price of bitcoin falls to this level, it can settle on another set of long-term contracts of $ 34,000, and so on.