Is Bitcoin on the verge of a bull trap or a bull run, with prices hovering around $50,000?




As the new year approaches, itcoin has been playing it safe, staying near to the $50K mark for the last five days as the bigger market's direction looked generally favourable. BTC's trajectory eventually managed to hit higher highs with the price comfortably over the $50K threshold after three short-term recoveries.

Nonetheless, with low retail excitement and an overheated futures market, whether the recent trend is a true bull run or a mere bull trap before the year ends remains a point of contention.

Summing up BTC’s run above $50K

Bitcoin’s price seemed to be approaching its upper limit after the recent rally from $45K to $51K over the last four days. On December 24, BTC was retesting the 21 Week Moving Average (WMA) after a bounce from the 50 WMA on 21 December. 

Source: Trading View

If BTC manages to break past the 21 WMA, the first hurdle will be the resistance level above $53,350. BTC, on the other hand, would need to make higher highs or lower lows for the next three days in order for the rise to continue.

Around 513k addresses that purchased nearly 382k BTC at an average price of $53,203 are still in the red, or 'Out of the Money.' If the top asset breaks through this price range and closes over $53,200 on a daily basis, the majority of these HODLers will enter the safe zone, potentially reducing sell-side pressure.

So, what’s the problem?

With BTC’s price still around $50K, the bullish and bearish sides are equally prevalent at the moment. However, the upper resistances are relatively weaker, while the support zone is stronger which paves the way for the asset’s run if BTC bulls can push for higher gains. 

The  Net Unrealized Profit/Loss (NUPL) for BTC turned positive on 20 December, highlighting that the network is in a state of net profit. Usually, recovery of the NUPL signal to the green zone of belief-denial has been an effective indicator of the beginning of a rally. 

Source: Glassnode

That being said, the 365-day and 30-day Market Value to Realized Value (MVRV) are both below zero which meant that another flash crash of a huge magnitude is unlikely in the mid-short term. 

However, with retail traders getting wiped out, the leverage ratio hit an all-time high recently. In fact, large Binance deposits occurred which could form a ‘potential bull trap’ even though the larger trend shows accumulation. 

Furthermore, with open interest in the futures market rising, leverage ratios rising, and retail investor sentiment remaining neutral, the market's scales could tilt on either side.

A price fall similar to that seen in June 2021 could be expected based on the current condition of leverage ratio, but this can be avoided if the price maintains its positive trajectory for the next few days as the market enters a new year.
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