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Reasons Why Bitcoin Is Struggling to Break Above $38,000

February 5, 2021 at 13:22 by Mark Stevenson

Recently, the price of one bitcoin rebounded from its low of $32,400, recording a 15% rise to $37,200. Bitcoin has been moving in the low price range so far, but this move was an impressive rise that led to bullishness.

Regardless of the reasons behind the rally, many traders were expected to follow the trend. However, during the Bitcoin rally, many top traders opened short positions and prices fell again. Even if traders believe Bitcoin is unlikely to test the $42,000 record high, it should be risky to bet on a short because Ether has hit a record high of $1,700.

Due to expectations for Ethereum 2.0 and decentralized finance, it is possible that assets are being transferred from Bitcoin to Ether. However, Bitcoin and Ethereum tend to trade in tandem most of the time.

According to data from TheTie, a provider of alternative data for cryptocurrencies, the number of Google searches for the word “buy crypto” reached a record high. According to the company, crypto-related social media activity has increased by 135% in the last three months.

In addition to these bullish factors, payment giant Visa has announced a partnership in cryptocurrency trading with digital banks and others. Another bullish factor is the withdrawal of 15200 bitcoins from Coinbase, CryptoQuant analysts point out. The withdrawal indicates that institutional investors may have accumulated Bitcoin in their cold wallets.

On the other hand, these bullish factors are in contrast to the long/short ratio of exchanges. From this indicator, you can tell if professional traders are bullish or bearish.

Exchange’s top traders BTC long-to-short ratio. Source: Bybt.com

From the chart above, we can see that pro traders on all exchanges have increased their short positions in the last three days.

Even though large investors, market makers, and arbitrage desks hold positions in cold wallets and Grayscale Bitcoin investment trust, the long-to-short ratio shows that there is a lack of confidence on whether BTC will break through $38,000 in the short term to reach the $40,000 level.

A more recent rise in Ether may have been caused by traders transferring assets from Bitcoin to Ether. This is not surprising given the upcoming listing of Ethereum futures on the Chicago Mercantile Exchange (CME) on February 8.

However, it’s hard to say that everyone has moved to a short position, as traders may have moved Bitcoin off the exchange in search of better yields.

If traders actually held short positions in Bitcoin, there would be signs in the derivatives market. To disprove this theory, today’s $1 billion options expiry is still in favor of the Bitcoin bulls with incentives to push the price above $40,000.

If you have any questions and comments on Bitcoin today, use the form below to reply.

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