Bitcoin made a quick dip in price this week and then regained its position above $97k. If it is to continue on an upward trend, it must break certain resistance levels. We discuss what they are in the article below.
This week, risk assets, including cryptocurrencies, pushed forward. In a space of two hours, Bitcoin moved up 3% and managed to regain positions above the $97,000 mark. In the same period, both the Nasdaq and S&P moved up by 1%. But what has caused this push, and what levels will see it continue?
What Caused the Bitcoin Price Rise?
There are numerous reasons for this hike in value. The immediate one seems to have come from a more relaxed stance on global trade tariffs, which have impacted the price of cryptocurrencies, including Bitcoin, over the last few months. This was due to possible talks between the US and China on trade agreements. The news has not only buoyed riskier assets but the stock market as well.
Prior to this, a downward correction in the value of Bitcoin had begun. This took it to the $95,000 and then the $94,500 mark. As it formed a low at $93,398, sentiment changed, pushing up with a high at $97,650. The Bitcoin price today has settled just under this $97k mark. However, there is no reason a positive outcome from these economic discussions would not send it higher, possibly through many of its psychological barriers. This could result in a renewed push to its previous level above the $100k mark.
Key Psychological Levels
The key resistance levels for Bitcoin are all micro changes around the $97k to $98k level. The first of these will be around the $97,750 mark, which, if breached, could easily see the coin rise to $98k. The first scenario is that this starts a mini bull run, easily amping it up toward the $100k barrier and possibly even beyond it.
It is worth noting that Bitcoin recently stalled at the $98k mark. This was through increased profit taking from Bitcoin owners, and the same could happen again. Combined with a lot of supply, it may signify further volatility.
The rush to this market has seen profit taking reach a level unheard of before. When examined, the Realized Profit/Loss ratio shows that people are selling Bitcoin in larger amounts faster than they have ever done before. This can be an indicator of market tops. This selling began to ramp up near the $95 level over the past few days.
Should this be the case, the second scenario is that it stalls at this $97,750k level once again. This could send it into retreat back down to the $95,000 mark. If it does not get support here, it could sink even lower to the $93k level before regaining ground.
Increased Demand from Bitcoin ETFS
One factor that could push the price of Bitcoin above these levels are Spot Bitcoin ETFs. In particular, their positive performance. In the last week alone, they have recorded $1.8 billion in inflows. BlackRock’s spot Bitcoin Exchange Traded Fund has now seen inflows for three weeks solid. This equates to $36 million in investment in the funds. This works out as $5 billion in new capital.
ETF products are always going to buoy confidence, as they are primarily seen as a way for traditional investors to join in with the crypto market. As they buy into a fund, instead of owning a product directly, it hedges against some of the volatility. The more people invest in this, the more it is a barometer of how the traditional financial sector is viewing the cryptocurrency sector.
Not all of this is positive, and it is worth noting that it is this product alone that has buoyed the market. Other products have seen negative assets or no flows since May 1st. Some products have even seen figures as high as $86.4 million in outflows.
Trade Without Boundaries
One further concept that could push Bitcoin higher is the increased barriers to economic trade. These include both tariffs and sanctions. This week, Global Investment Management Firm, VanEck, discussed how this could push up the price of Bitcoin, as people use it to circumvent both.
In a note published this week, they highlighted how Russia and Venezuela have already spoken about the role of BTC in international trade. They also stated they believe the overuse of sanctions will push many nations to the use of Bitcoin for this reason. This will also be fueled by the desire to hedge money away from a risky US dollar.
This theory has also been backed up by BlackRock. They have noted that it is an emerging global money alternative. This is because it is not a sovereign asset and so has no country-specific risk.
All these factors will play a part in how and when Bitcoin climbs in price. It seems that short-term economic worries are feeding into its volatility. Yet by watching these crucial points, investors should be able to pinpoint the long-term implications of changes to Bitcoin’s pricing.
