Does Bitcoin's Ongoing Rally Have Legs? Here's Why Analysts Think It Does
Bitcoin is pressing higher after a $300-400 correction on Sunday morning. The leading cryptocurrency currently trades at $10,400 as of this article’s writing, around $200 from the lows.
This comes after the leading cryptocurrency printed a pivotal weekly candle close above $10,000. $10,000 has long acted as an important horizontal level for Bitcoin, having marked three separate highs over the past year.
Analysts think that Bitcoin’s ongoing rally may have legs despite it being so nascent and relatively small.
One sign that this is the case is the price action of altcoins.
Many altcoins, especially those in the DeFi space, are breaking out and surmounting the highs they posted before Sunday’s drop. This suggests that buyers have re-entered the market, seemingly in response to strength in legacy markets.
Why Bitcoin Is Primed to Press Higher
One reason why Bitcoin is primed to move higher is due to positive trends in the derivatives market. One trader recently shared the chart below after the drop on Sunday morning, noting that the correction allowed Bitcoin to tap key liquidity zones around $10,300:
“As usual, liquidity levels is where it’s at. Liqs get taken, price dumps. We just took some liqs again. I can see this going back up from here, otherwise it maybe dumps a bit further to 10100. This move feels like a classic shakeout by the way. Also you should follow this guy if you want to know what a real whale is thinking.”
Chart of BTC’s price action over the past few days with analysis by crypto trader Byzantine General (@Byzgeneral on Twitter). Chart from TradingView.com; custom indicators that show liquidity levels from HyBlock Capital.
Adding to the expectations that Bitcoin will soon rally are funding rates. The funding rate is the fee that long positions pay short positions in a perpetual futures market to ensure the price of the derivative is at the price of the spot.
Negative funding rates are now prevalent in the crypto market due to immense selling pressure on derivatives platforms.
This suggests that Bitcoin could soon bounce.
Legacy Market Rally Could Help
A rally in the legacy market could aid the crypto market recovery.
Alex Kruger, a macro analyst and economist, recently shared that there is a macro factor that could send legacy markets skyrocketing:
“Could have an obscenely green rocket start of the week. From Wednesday on it will be up to the Fed to let the party continue. Quite a few IPOs this week could help fire up risk appetite.”
Bitcoin is likely to move higher if stocks do.
Could have an obscenely green rocket start of the week. From Wednesday on it will be up to the Fed to let the party continue. Quite a few IPOs this week could help fire up risk appetite.
— Alex (@classicmacro) September 14, 2020
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