MW Bitcoin is struggling at these prices - and crypto traders are fretting
By Jurica Dujmovic
Why some bitcoin experts are breaking with the bulls.
When everyone is positioned long and anticipating huge profits, the more likely scenario is a price dip.
Bitcoin (BTCUSD) is facing significant challenges in topping the $65,000 resistance level, a pivotal point that has emerged as a major barrier in its price trajectory. This particular resistance level is critical because it represents a threshold that, if surpassed, could signal a strong upward market trend. However, bitcoin's repeated failure to overcome this mark has resulted in heightened apprehension among investors regarding the cryptocurrency's short-term viability and the broader market sentiment.
Bitcoin had encountered similar resistance levels before that either resulted in significant price corrections or, alternatively, ushered in substantial bull runs upon a successful breach. The current resistance is particularly notable because it aligns with technical indicators that suggest overbought conditions, such as the relative strength index $(RSI)$ peaking just before declines. These technical patterns suggest potential exhaustion among buyers, making further gains increasingly difficult without a corresponding increase in buying momentum or positive market catalysts.
To provide a clearer picture of bitcoin's outlook, several industry experts have weighed in with their analyses and predictions.
Trader Alan Santana's detailed hypothesis on TradingView predicts a significant downturn for bitcoin. Santana expects bitcoin to crash next week, citing several technical indicators:
A topping pattern resembling a cap.Both the all-time high $(ATH)$ and the following lower high sessions closed below the 10-day exponential moving average (EMA10).Two weeks of trading below EMA10 confirms a bearish trend.
Santana's analysis suggests an initial drop toward the EMA50 (around $46,000), which might produce a bounce and a short-term lower high, followed by a potential test of bitcoin's 200-day moving average (MA200) around $34,000. This prediction is based on the weekly timeframe, indicating a significant downturn if the resistance at $65,000 holds firm.
Is the situation really that dire? John Glover, CIO of financial services platform Ledn, highlights a critical factor that influences current market conditions. He notes that when everyone is positioned long and anticipating huge profits, the more likely scenario is a price dip.
Glover points to the recent net outflows from bitcoin ETFs over the past five weeks as a significant indicator of this trend, suggesting that the market might not have the necessary momentum to push prices higher without new buyers. His observations raise an important question about market sentiment: Can bitcoin sustain its price levels without fresh inflows?
This concern is echoed by Ryan Lee, chief analyst at research firm Bitget Research. Lee emphasizes the importance of ETF flows and stablecoin market capitalization in assessing bitcoin's potential movements. He observes that the trend of net outflows in bitcoin-owning exchange-traded-funds in April explained the lackluster performance, but recent data showing "large inflows, small outflows" in May indicates that the downward pressure may be ending.
Lee suggests that the increasing market capitalization of stablecoins, despite the market downturn, implies ample liquidity, which could support a price rebound in June. James L. Koutoulas, CEO and founder of Typhon Capital Management, offers a broader perspective on the factors driving bitcoin's volatility. He asserts that crypto is inherently volatile, and various macroeconomic and geopolitical factors, such as ETF flows, global macroeconomic conditions, geopolitical tensions, and regulatory actions, will continue to influence the market.
His analysis underscores the complexity of predicting bitcoin's price movements amid such a volatile backdrop. The complexity is further illustrated by the interaction between bitcoin and altcoins - events affecting altcoins also influence bitcoin.
Specifically, the upcoming SEC decisions on ethereum (ETHUSD) spot ETF applications add another layer of uncertainty. Marija Matic from Weiss Ratings points out that most analysts expect the denial of ethereum spot ETF applications later this month and notes that the market is more concerned about the reasons behind the denial. If the SEC indicates that ether is considered a security, it could lead to a prolonged legal battle and pressure on ethereum prices. However, if a denial does not mention securities concerns, the impact might be less bearish since this scenario is already being priced in by the market.
Read: Ether ETFs are unlikely to arrive this month. Get ready for more legal battles ahead.
The market's reaction to bitcoin's failed breakout attempts can be seen in the trading volume and price volatility during these periods. A sustained inability to surpass the $65,000 mark may lead investors to shift toward more conservative positions or diversify into other assets. This sentiment is crucial as it influences the overall market dynamics, potentially even leading to a bearish phase if the resistance holds.
Bitcoin bulls in the running
Some analysts remain optimistic about bitcoin's prospects. Proponents of a bullish outlook highlight bitcoin's growing adoption as a store of value and its increasing integration into mainstream financial systems. They argue that the current resistance is a temporary hurdle, and that long-term fundamentals remain strong.
Matt Bell, CEO of Turbofish, which is developing open-source blockchain technology, explains that while technical indicators may suggest a potential downturn in bitcoin's price, it's essential to view such fluctuations within the broader context of its underlying technology and market dynamics. He emphasizes bitcoin's resilience, which stems from its robust technological foundation, anchored by the immutable blockchain and decentralized architecture.
Graeme Moore, head of tokenization at Polymesh, which is involved with blockchain technology, supports a long-term view for bitcoin investors by highlighting several positive developments in the market. He notes that the State of Wisconsin Investment Board recently purchased more than $100 million worth of bitcoin ETFs, along with shares of MicroStrategy $(MSTR)$, a company holding huge amounts of bitcoin on its balance sheet.
Moore said he expects established institutional buyers to enter the bitcoin market as due diligence, education, and confidence spread throughout their organizations. He also points out other tailwinds for bitcoin:
The recent halving event has reduced miners' sell pressure, although its full effects are yet to be felt.Square SQ merchants can now automatically convert a portion of their daily sales to bitcoin.El Salvador continues to purchase bitcoin daily.
Moore suggests that bitcoin's recent consolidation after a significant run-up often leads less-experienced traders to prematurely call the end of a bull run, only for bitcoin to resume its upward trajectory.
The sentiment among these analysts suggests that while bitcoin's short-term volatility may persist, the long-term trajectory for bitcoin remains up. Metrics such as decreasing supply on exchanges, increasing long-term holding by big market players, and ongoing development in the bitcoin ecosystem are cited as indicators of underlying strength. This school of thought suggests that once the macroeconomic uncertainties stabilize, bitcoin could resume its upward trajectory, possibly breaking past $65,000 and setting new highs.
Short-term volatility notwithstanding, it's certain that bitcoin's value proposition rests more heavily on continued adoption by institutional investors and greater integration into traditional finance and payment systems. Long-term bitcoin investors may see that price lingers below $65,000 as an opportunity to accumulate more of the cryptocurrency at a discount before its next bull run.
Also read: Bitcoin is rising. Why prices need to hit this key level to end crypto worries.
More: Grayscale's bitcoin fund has hefty fees. Why you might be stuck.
-Jurica Dujmovic
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(END) Dow Jones Newswires
May 15, 2024 07:15 ET (11:15 GMT)
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