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Bitcoin Nears Highs, But It May Not Be Ready for a Breakout; Here’s Why

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  • Bitcoin has seen some incredible strength throughout the past few days, with each dip being aggressively absorbed by buyers
  • This has allowed the crypto to rally past the $18,000 level and gain what appears to be a strong and stable foothold here
  • Where it trends in the near-term should depend largely on its continued reaction to this level
  • One analyst is noting that BTC does look like it wants to test its post-2017 highs of $18,600
  • That said, he also notes that this latest move higher is mainly being propelled by derivatives traders, with funding rates soaring
  • This could be a grave sign that downside is imminent in the near-term

Bitcoin is in the process of pushing higher, with bulls aiming at testing its 2020 highs of $18,600 that were set just a few days ago.

How it reacts to this level in the near-term will depend largely on whether or not spot buyers will step up and take control of this movement, as one trader is noting that derivatives are currently the source of this upwards momentum.

He points to the high funding rates as a reason why this move may not be too long-lasting.

Bitcoin Pushes Higher as Bulls Target $18,600

At the time of writing, Bitcoin is trading up just under 4% at its current price of $18,550. This marks a serious upswing from its recent lows of $17,400 set after these highs were first tested earlier this week.

The strength seen across the aggregated market today has been quite intense, and whether or not it remains this way will likely depend on Bitcoin.

If it breaks above $18,600, the entire market could instantly see massive capital inflows that help send BTC towards $20,000.

Analyst: BTC May Not Sustain Short-Term Momentum

One analyst explained that Bitcoin might not be able to maintain its short-term momentum. He notes that the fact that derivatives volumes are driving this move is concerning.

He also points to high funding rates as one reason why it may soon see downside.

“BTC: Looks like this wants to go for the highs, but not sure if it’s ready for a real breakout yet. Upside been mostly pushed by derivs ~ funding is pretty damn high. Fading the first move ain’t no bad idea imo.”

Image Courtesy of George. Source: BTCUSD on TradingView.

Whether or not Bitcoin can post a high time frame close above this level will provide serious insights into where the market will trend next.

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.