Bitcoin begins a new week inching closer to $20,000, but selling pressure is reining in the bulls—what’s to come?
After another successful weekend, Modern Consensus takes a look at the factors shaping Bitcoin price action at $19,000. We also publish a weekly roundup every Friday, the latest edition of which may be found here.
Woo: “Beware of bull traps”
Bitcoin set itself apart over the weekend, climbing out of last week’s lows to hit $19,400 on the back of three-day gains which reached 10.5%.
Selling pressure had abounded through the previous week’s trading, thanks to BTC/USD failing to tackle its final resistance hurdle at $20,000. The same remains true now—data from exchange orderbooks shows heavy sell order numbers lined up from $19,400 onwards.
Since Bitcoin hit exactly that level before reversing downwards, the role of exchange activity in dictating forthcoming short-term price action is clear.
At press time, BTC/USD is circling $19,100, biding its time as traders consider which direction the market would likely move through the rest of Monday.
“Bitcoin back above the meme trend line after yet another higher-low on the trend. Looking for a close back above $19,385+,” Josh Rager summarized to Twitter followers the day previously.
“‘Buy-the-dip’ only works in bull markets and apparently, Bitcoin is showing yet again that this is a bull market.”
Others are more cautious, with statistician Willy Woo entertaining the possibility of a protracted consolidation period before the $20,000 sell wall vanishes. For this, he referenced the Spent Output Profit Ratio (SOPR) metric.
SOPR, created by on-chain researcher Renato Shirakashi, surveys investors to work out profits and losses from trades on a given day—but unlike those which rely on taking their word for it, this metric is “lie-proof.”
“We like to use SOPR because all investors lie about their losses and on-chain guys like smart sounding acronyms,” Woo wrote on Twitter, writing that it was the chart he “cared most about” in the current circumstances.
“Profit-takers initiated weeks ago, we need to wait until they exhaust before there’s full freedom to explore new highs,” he summarized.
“It’s a waiting game, likely until Jan 2021 for a full reset. Till then beware of bull traps.”
Overexuberant long positions may also come under pressure from the looming Bitcoin futures gaps which have only increased in number this weekend. Thanks to the gains on Saturday and Sunday, CME Bitcoin futures opened $1,000 higher on Monday, paving the way for BTC/USD to explore yet another void below spot price.
As Modern Consensus reported, a previous gap of $1,300 between $16,900 and $18,200 remains only half explored, with the potential for a fresh dip to the bottom of that range remaining.
“…The most likely area that I’m going to look for longs is this $16,000 zone,” Michaël van de Poppe said on Monday about the prospects of a drop.
“So the $16,000 zone is the range low which most likely will receive a test.”
Gold disappoints ahead of stimulus decision
Beyond Bitcoin, macro triggers are centring on decisions from the U.S. this week. Congress is debating a $900 billion coronavirus stimulus package, something which lawmakers nonetheless concede may not result in a deal.
On Wednesday, the Federal Reserve is expected to update markets on its policy, something which could in turn impact the performance of the already weak dollar.
Stocks have climbed at the open in Asia, but other assets are flat, including traditional safe haven gold. Despite its lackluster performance throughout the past months, the precious metal retains its steadfast believers, with Peter Schiff taking the opportunity to cast shade on Bitcoin’s latest price action.
For his inspiration, Schiff took MicroStrategy, which has completed an offering to raise funds for the purchase of roughly $650 million more BTC.
“Since (MicroStrategy CEO, Michael Saylor) made the mistake of publicly announcing his $650 million Bitcoin buy in advance, traders can buy first, pushing up the price of #Bitcoin now so they can sell later at a higher price, potentially leaving Mircrostrategy (sic) shareholders as the ultimate bagholders,” he tweeted.
The company’s first round of Bitcoin from August—a purchase involving 21,454 BTC for $250 million—has since delivered returns of over 60% or $150 million.
