Bitcoin Buyers Gain Momentum – $40k a Key Area in the Short-Term
After several months of underperformance, Bitcoin started to show signs of recovery since July 21st, when a strong rebound began. Over $1 billion worth of short positions were liquidated during 24 hours at that, assumed to one one of the largest in history for BTC.
There was no major news that might have backed a strong move up, which is why experts continue to believe it was mainly flow-driven. The lack of follow-through buying once the price reached $40,000 keeps that theory in place until buyers will manage to break above and drive Bitcoin closer to the current all-time highs.
Bitcoin rebounds from 2021 lows
Rising away from the $30,000 support area was a relief for buyers, given Bitcoin has been under pressure since mid-April 2021. The +50% drawdown erased all the gains for the year and there are even concerns for a deeper correction, similar to what happened in 2018.
Technicals are in the spotlight and as long as Bitcoin manages to remain above $30,000, it could continue building a bottom, even though short-term setbacks might occur along the way.
Upside capped by June highs
For the time being, the upside is capped around the June 2021 highs, where sellers have shown resilience. The context is shifting in favor of the buyers, considering the rally has been relatively strong, with over 10 days of consecutive buying, and reduced weakness after a minor pullback, suggesting buyers are willing to step in at a higher level.
That could signal a pre-breakout formation and new opportunities for traders who trade Bitcoin via CFD brokers. Due to reduced spreads, the use of margin, and accurate execution, they can place trades if buyers are showing signs of increased strength.
USD strength – could it derail Bitcoin lower?
Although the Bitcoin picture is improving, several downside factors should be accounted for as well. One of them is the strengthening of the US dollar, which experts believe could have a disinflationary effect on the global economy, as well as assets like Bitcoin.
The global reserve currency failed to meet the expectations and formed a bottom in 2021 against most of the developed and emerging currencies, as the biggest economy in the world is recovering from the pandemic at an accelerated pace.
Regulation no longer the main concern
Despite negative headlines related to regulation, Bitcoin does not seem to react strongly when it comes to such developments. Countries all around the world have shown commitment to regulate digital assets, yet actual steps towards that fail to materialize.
It could take another few years until a global regulatory framework will be in place and it will require coordination among nations, something difficult for now considering the diverging views on how crypto should be allowed to operate within the economy.
Market participants will also need to take into account the 4-years cycles Bitcoin has been through since it’s inception, mainly due to the halving events that reduce the new supply. It is not yet known if the bullish phase of the cycle already ended or still has room to go.
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