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Bitcoin May Soon Push Higher After Taking Out Key Liquidity Levels

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  • Bitcoin has witnessed some slight instability throughout the past few hours, with sellers rejecting BTC above its key resistance level at $10,500
  • The decline from its highs shows that this price remains a strong region of selling pressure
  • The likelihood of BTC seeing further downside in the near-term is now significantly higher than what it was previously
  • Some analysts are noting that where it trends next will depend largely on its reaction to a few key liquidity levels that he is closely watching

Bitcoin faced a slight rejection above $10,500 overnight, with bulls being unable to maintain the strong momentum that they had built throughout the past several weeks and months.

This has contributed to the cryptocurrency’s technical weakness and may indicate that some downside is imminent in the near-term.

It is important to note that BTC has yet to break below its support at $10,200, which has been defended by buyers on multiple occasions throughout the past several days and weeks.

While speaking about this latest move, one analyst explained that the benchmark crypto is now approaching a few key liquidity levels. How it reacts to these levels should offer insight into its near-term outlook.

Bitcoin Erases Yesterday’s Gains as Buyers Lose Their Momentum 

At the time of writing, Bitcoin is trading down just under 2% at its current price of $10,300.

This is around the price at which it has been trading throughout the past few days and weeks, with buyers being unable to garner any strong momentum as sellers continue defending $10,500.

For a brief moment overnight, the cryptocurrency surged as high as $10,560 before plunging towards $10,280. This is around the price at which it found some strong support that slowed its descent.

Analyst: BTC Likely to Continue Plunging Until It Takes Out Key Liquidity Targets

While speaking about the cryptocurrency’s near-term outlook, one analyst explained that he is watching for Bitcoin to reel towards $10,100 as it takes out some downside liquidity.

He does state that he expects the benchmark crypto to continue climbing higher once it takes out these key levels.

“As usual, liquidity levels is where it’s at. Liqs get taken, price dumps. We just took some liqs again. I can see this going back up from here, otherwise it maybe dumps a bit further to 10100,” he explained.

Image Courtesy of Byzantine General. Chart via TradingView.

How the aggregated market trends in the coming few hours should provide insight into the significance of this recent Bitcoin rejection.

Featured image from Unsplash.
Charts from TradingView.





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Bitcoin

Bad call? Bitfinex bears closed a block of Bitcoin shorts before the drop below $32K

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Bitcoin price is still in a rut, trading near $33,000 and trapped in a downtrend that just seems to get worse with the passing of each day. As the price slumps, analysts have consulted with several technical and on-chain metrics to explain the price collapse, but none of these have picked up on the exact reason. 

One area of interest has been the sharp rise in short positions at Bitfinex in the past week. Traders are placing exaggerated importance on these Bitcoin (BTC) margin shorts as if they are predictors of the current market crash. Still, as Cointelegraph previously reported, analysts forget that Bitcoin margin longs are usually much larger.

On June 18, longs outnumbered Bitfinex shorts by at least 22,800 BTC, but 87% of the short positions were closed before June 22. Currently, margin longs are 43,850 BTC higher than the amount shorted.

While those shorts are usually savvy traders, it is unlikely that they knew in advance that Chinese banks would prevent their clients from engaging in activities involving crypto trading or mining.

More importantly, these bearish positions were built while MicroStrategy was buying $500 million in Bitcoin after a successful senior secured note private offer. To make things worse, Michael Saylor’s business intelligence firm announced the intention to raise another $1 billion by selling stocks to buy Bitcoin.

Let’s take a look at how these courageous shorts fared.

Bitfinex margin shorts (blue) vs. Bitcoin price in USD (orange). Source: TradingView

On June 6, shorts increased from 1,380 to 6,700 at an average price of $36,150. Three days later, another 12,180 shorts were added when Bitcoin was trading at $37,050. Lastly, between June 14 and 15, shorts increased 6,000 to a 25,000 peak while Bitcoin averaged $40,100.

By looking at the Bitcoin prices when those short position increases took place, it is reasonable to assume that the 23,500 contract increase (green circles) had an average price of $37,625.

Related: Traders search for bearish signals after Bitcoin futures enter backwardation

Traders closed positions before BTC crashed bel$32,000

These short positions were steadily closed over the past three days when Bitcoin was already trading below $37,000. However, 17,000 short contracts had already been closed by the time the price plunged below $33,500. Therefore, it is implausible that the average price was below $34,500.

No one would complain about gaining 8%, shorting the market to generate a $73 million profit. However, it is essential to note that on June 16, when Bitcoin reached $40,400, these shorts were underwater by $65 million.

This analysis shows how even highly professional traders can go deep underwater. There’s no way to know if this trade would have been profitable had the crackdown on China not aggravated Bitcoin price or if MicroStrategy managed to raise the $1 billion before the price drop.

If anyone still believes in market manipulation, at least there’s comfort in knowing that pro traders can face drastic losses as well. However, unlike us mortals, whales have deep pockets and patience to withhold even the most rigorous thunderstorms.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.