Connect with us

Bitcoin

Bitcoin Indicator That Precedes Major Bull Runs Flashes Again

Published

on



Bitcoin has fallen by almost 3.5 percent after establishing its year-to-date high at $15,977 last week. But despite risks of extended downside momentum looming, a fundamental indicator sees the cryptocurrency in a strong buying zone.

The so-called “All Exchange Inflow Mean,” or MA7, measures the average Bitcoin deposits made across all exchanges on a 7-day timeframe. When the metric tops out, Bitcoin signals a rebound to the upside, at least according to the indicator’s creator CryptoQuant, a data aggregation platform.

Exhaustion in Bitcoin inflows means that traders are switching their selling sentiment to “HODL.” They keep lesser and lesser cryptocurrency units in their exchanges’ wallets that leads to lesser liquidations. The CryptoQuant chart below illustrates the relationship between the Bitcoin price and MA7.

Bitcoin Inflow and price correlation. Source: CryptoQuant

The latest instances show that Bitcoin trends upward on signs of a pullback from the MA7 indicator. Most recently, the cryptocurrency rallied by more than 200 percent after MA7 topped out in March 2020. The results were similar in late 2019 and late 2018.

“After the price plunge, there have been subsequent exchange inflows by whales for two reasons. 1/ In the bull market: To sell it at the local high. They sell when the retail investors are active on exchanges. 2/ In the bear market: To sell it if the unusual fear-sell happens,” explained Ki-Young Ju, the CEO of CryptoQuant.

‘The latest MA7 readings show that Bitcoin is still in a strong buy zone,’ he added.

Bitcoin Technical Outlook

Analysts away from on-chain fundamentals predicted a similar bullish outcome for Bitcoin but based on technical indicators. A pseudonymous daytrader noted the cryptocurrency rising upward inside a range that appeared like an Ascending Triangle.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin trade setup, as illustrated by PostXBT. Source: BTCUSD on TradingView.com

In retrospect, an Ascending Triangle in an uptrend is a bullish continuation pattern. The price rises while staying above the upward slope of the Triangle. Meanwhile, it tests the Triangle base as resistance for a potential breakout move to the upside. If it happens, the price rises by as much as the maximum length of the Triangle.

“The level I marked out for a retest is getting chopped up to hell,” the analyst said. “Dismissing it and focusing on [the] resistance at the highs. Ascending triangle forming, which is typically bullish. Redline marks where a break in market structure would appear. Bullish whilst we’re above.”

Risks

A majority of downside risks Bitcoin face now lies outside the technical purview.

One of the major macro catalysts that could drive the cryptocurrency lower is a no-stimulus scenario. Expectations of the Republicans holding a majority in the US Senate could delay President-elect Joe Biden’s plans to introduce a massive coronavirus relief package.

At the same time, Pfizer’s successful coronavirus vaccine trial expects to decrease investors’ appetite for safe-haven assets. That also poses risks for Bitcoin as it trades near its three-year high – an attractive selling area.

Meanwhile, trader Koroush AK reminded:

“A 50% retracement is healthy during an uptrend. In fact, we would need to go below $14,000 for my bias to shift. So long as the trend stays intact, I will be favoring longs and aggressively longing dips.”





Source link

Bitcoin

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

Published

on

By


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.