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1 June 2023
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Bitcoin Price at Pivotal Point, Crypto Traders Divided Over BTC Short-Term Future

The price of Bitcoin (BTC) has remained stagnant in the $9,300–$9,500 range for seven days with low volatility. Traders expect the top cryptocurrency to see a huge price movement in the near term. However, prominent crypto traders are divided on whether Bitcoin will see a resumption of a bearish trend by revisiting the $7,000s in the upcoming weeks or if it will finally break out of $10,500.

Due to the uncertainty in the market since mid-May, various data points and technical analyses present sufficient arguments for both bullish and bearish scenarios. For example, cryptocurrency trader Satoshi Flipper said that in a highly undetermined price range like this, the balanced trade is to remain neutral and prepare for either scenario:

“Everyone seems certain about BTC’s next direction. Many think we’re shooting for range highs @ 9.8k, others convinced we’re nuking down. Some think consolidation, others distribution. Only one thing is certain –> nobody knows which direction. I prepped for both.”

Many traders are seemingly taking a similar approach, especially in the futures market, remaining net neutral with hedge positions. It shows that Bitcoin is at a pivotal point, and investors are preparing for a spike in volatility after nearly 45 days of ranging with low volatility.

The bullish scenario for Bitcoin

The main bullish scenario for Bitcoin in the short term is a breakout above $10,500, as has been the case since May. BTC is at risk of seeing a triple top, with two previous peaks in October 2019 and February that both ended at $10,500.

The case for a triple top gets invalidated if Bitcoin continues to stay above key support levels at $9,400 and $9,000. Hence, whether Bitcoin remains in the $9,300–$9,500 range for the weeks to come or not may decide the medium-term price trend of BTC. Michael van de Poppe, a full-time trader at the Amsterdam Stock Exchange and a Cointelegraph contributor, explained:

“Crucial level held and we are back in a narrow range. As long as $9,200-9,250 holds, I suspect continuation. Next job; breaking and flipping $9,550-9,600. If we do, the grind towards the highs can start. Acceleration above $10,250-10,500 towards $11,500.”

But Bitcoin has struggled to surpass $9,550 after four attempts in the last six days. The declining volume of the spot market along with decreasing volatility remain as the biggest roadblocks for a proper breakout. A Bitcoin trader known as Ethereum Jack said that they have expected Bitcoin to rally since early June. They explained that the absence of an upsurge raises the probability that a big price movement is imminent:

“Watching today’s market closely. A few weeks ago I believed the market would rally and if so that the next few days would form a top for BTC. Lacking the rally, I don’t dismiss the idea it’ll be a contunuation pivot and either way market looks primed for a move.”

Bullish traders are leaning toward the past week’s range as a “continuation pivot.” The term is often used to describe a phase before an extended rally occurs. If the stability in the Bitcoin market is a continuation pivot, then BTC could eye a recovery above $10,500 to higher resistance levels such as $11,500. One fundamental factor that amplifies the bullish argument for Bitcoin in the third quarter of 2020 is its most recent difficulty adjustment.

On June 17, Cointelegraph reported that the mining difficulty of Bitcoin increased by 14.95% — the largest margin since January 2018 and the first increase in more than two years. When the difficulty to mine Bitcoin increases substantially in a short period of time, it can shake out over-leveraged miners. It makes it more expensive to mine BTC overnight, typically causing a decline in hash rate and an increase in selling pressure from miners.

Bitcoin difficulty adjustments and the monthly price chart of BTC. Source: Nunya Bizniz

Bitcoin difficulty adjustments and the monthly price chart of BTC. Source: Nunya Bizniz

Historically, as cryptocurrency analyst Nunya Bizniz said, major difficulty adjustments and miner capitulation have marked bottoms for BTC. Simply put, when large difficulty adjustments occurred in the past, they led to an extended upsurge over the next few months. Nunya Bizniz clarified: “Monthly DDA’s [downward difficulty adjustments] may signal miner capitulation and market bottoms.”

A stable range above a key support level that could turn into a continuation pivot and difficulty adjustments often marking major bottoms for BTC can fuel a near-term rally.

Predictions for a bearish scenario

Generally, the bearish prediction on Bitcoin revolves around the triple top formation. BTC has failed to claim and establish $10,500 as a support level for nearly a year, leaving some traders unconvinced that it will break above it this time around. In recent weeks, some traders have started to suggest a steeper bearish trend for Bitcoin in the medium term.

Christopher Inks, a trader at Texas West Capital, said a revisit of sub-$4,000 is a possibility. On March 13, the price of Bitcoin dropped to as low as $3,600 on BitMEX as the United States stock market rapidly sold off in a panic-driven correction. Short-term bears are mainly considering the “Elliott Wave Theory” to forecast a downtrend as BTC approaches the third quarter of 2020. Inks said:

“My GBTC Elliottwave count aligns with the spot and CME futures counts, suggesting that $3000 is a strong possibility. Bitcoin and the @GrayscaleInvest Bitcoin Trust don’t diverge for obvious reasons. I could be wrong, but what if I’m not? Are you prepared?”

The thinking around a Bitcoin price fall to the $3,000s is based on the reason BTC plunged to $3,600 in March. An unprecedented intraday price drop caused over a billion dollars worth of futures contracts to get liquidated. At the time, the open interest on the BitMEX exchange surpassed $1 billion. Since then, the market on BitMEX has struggled to recover from the drop. The open interest of BitMEX hovers at around $630 million, indicating there are fewer futures contracts in the market compared to March.

The U.S. stock market is also showing resilience despite the lack of involvement of institutional investors throughout the past three months. The appetite for equities and risk-on assets as economies around the world begin to reopen may decrease the likelihood of an extreme drop to $3,000 or $4,000. In the near term, market data suggests the key range to watch for sellers is $8,700 to $8,900. Former Adaptive Capital analyst Nik Yaremchuk said a volume heat map shows Bitcoin has strong support in the high-$8,000 region.

Bitcoin heat map chart showing strong support at $8,700. Source: Nik Yaremchuk

Bitcoin heat map chart showing strong support at $8,700. Source: Nik Yaremchuk

If sellers manage to bring the price of Bitcoin below $8,700, then the probability of a steep correction to the $6,000–$7,000 range increases. Trader Pentarhudi similarly said in the past, “tripple top on daily… Bearish pattern. Will trigger at close below $8000 with a target to $6000.”

Variables that may affect the price of BTC

Three major variables can affect the price of Bitcoin in the upcoming weeks: the rise in the number of “HODLers,” the imminent options expiration date and U.S. President Donald Trump’s unraveled stance on Bitcoin.

According to reports, President Trump told Treasury Secretary Steven Mnuchin to go after Bitcoin. This information comes from former national security adviser John Bolton, who recollected the event from May 2018 in his new book.

Against the backdrop of tightening regulations, Secretary Mnuchin issued an official statement about cryptocurrencies in July 2019, warning investors and businesses. He said at the time: “We are concerned about the speculative nature of Bitcoin and will make sure that the U.S. financial system is protected from fraud.” But whether the publicized stance of President Trump toward Bitcoin could rattle institutional investors — which have been aggressively accumulating Bitcoin since early 2020 through Grayscale — remains to be seen.

Additionally, on June 26, the Bitcoin options market is set to see a major options expiration date with $930 million worth of contracts. Options contracts give traders the right, not an obligation, to buy or sell an asset at a previously agreed-upon price and date. As an expiration date nears, there is likely to be an increase in buy and sell orders, which may cause a sudden increase in volatility. Depending on market sentiment, volatility during the options market expiration may place additional selling pressure on Bitcoin or lead to an accumulation period.

Finally, the continued accumulation of Bitcoin by long-time holders, could improve the sentiment around the market following the highly anticipated options expiration date. Alistair Milne, the chief information officer of Altana Digital Currency Fund, said the level of HODLing is nearing 2015 and 2016 levels.

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