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As bitcoin approaches support at $ 30,000, analysts are divided on what will happen next. Some see this level being maintained and a return to $ 40,000. Others point to weak demand and say further declines are likely.
“We don’t think there are many short-term downsides as we are trading near the low end of the $ 30,000 to $ 42,000 range,” said Delta Exchange CEO Pankaj Balani. “In the near term, the macroeconomic environment does not appear weak, with broader markets continuing to recover and US tech stocks registering all-time highs weekly.”
The S&P 500, Wall Street’s benchmark stock index, rose 1.4% on Monday, signaling a reassessment of risk in financial markets after last week’s beating. Asian stocks traded higher earlier in the day as comments from Fed Chairman Jerome Powell allayed fears of taper.
Related: Bitcoin Finds Support At $ 30,000; Facing resistance at $ 36,000
In written remarks prepared for his testimony to the House Selection Subcommittee released yesterday, Powell reiterated his view that a recent rise in inflation would be short-lived. Stocks, commodities and bitcoin were hit last week as the dollar rallied on the Federal Reserve’s unexpected interest rate tone.
Balani expects a rebound to $ 40,000 in the coming weeks. Singapore-based QCP Capital has said it expects bitcoin to continue trading in the $ 30,000 to $ 40,000 range.
“With retail sales now short, the market will be ready for short cuts,” QCP Capital told its Telegram channel on Monday. “Historically, whenever retail starts to be short like this, the market tends to have a hard time continuing the downtrend.”
The company pointed to the recent negative funding rate for perpetual futures listed on FTX, Deribit, and BitMEX as evidence of the shorthand bias of retailers. The funding rate is the cost of holding long / short positions. A negative impression implies that many traders are bearish or hold short positions.
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Related: Mad Money Host Jim Cramer Says He Sold Most Of His Bitcoin Following China Crackdown
Bitcoin hit a low in the first quarter of 2019 with negative funding rates and rose sharply over the next three months. The negative rates observed after the March 2020 crash and in the third quarter of 2020 also marked price lows.
QCP’s preferred trade remains a short choke – an options strategy aimed at profiting from the looming consolidation / drop in price volatility. This involves selling the same expiration calls and puts at strike prices equidistant from the spot market price.
According to Amber Group, some investors have sold puts options below $ 30,000, a sign that they expect key support to continue. Writing options or strategies such as short choke is quite risky and best left to large companies and institutions with a plentiful supply of capital.
Others are less bullish, with Stack Funds claiming the cryptocurrency could drop below $ 30,000.
“We are still seeing moderate inflows from family office and high net worth individuals, however demand has slowed slightly since May,” said COO and co-founder of Stack Funds, Matthew Dibb. “Based on recent price movements, we expect bitcoin to likely exceed $ 30,000 in the near term, while continuing to increase its dominance over market capitalization.”
Crypto-finance service provider Amber Funds and OKEx Exchange have also factored in slowing demand.
“There is no direct evidence that the Chinese are buying the BTC plunge. As the ChaiNext tether (USDT) OTC index shows, the value hovered at 99 during the last few weeks of June, showing a slight haircut in USDT trading, ”said Matthew Lam, analyst at the OKEx crypto exchange.
“There is little evidence of declining demand. People are always left out, ”Amber Funds said in a Telegram conversation.
With weak demand, sellers may be successful in driving the cryptocurrency down thanks to a constant stream of negative regulatory news from China.
Dibb said the charts also looked bearish. The daily chart’s MACD histogram, an indicator used to gauge strength and trend changes, has fallen below zero, signaling the end of consolidation and the potential for a further sell-off.
Bitcoin is trading near $ 31,500 at the time of publication, after falling 11.17% on Monday, the largest single-day drop since May 19, according to data from CoinDesk 20.
“The cryptocurrency needs to recover $ 40,000 for any significant recovery,” said Lam of OKEx.
Also Read: Ether Falls Below $ 2,000, Bitcoin Weakens As China Asks Banks To Cut Crypto Transactions
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