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The price of Bitcoin (BTC) hit $ 19,469 on Coinbase, reaching its highest point since its December 2017 high. Although the dominant cryptocurrency is on the verge of breaking its all-time high, there are some warning signs- runners to take into account.
Three potential reasons Bitcoin faces the possibility of a pullback to $ 20,000 are bull trap, resistance to overheads, and an overcrowded derivatives market.
A potential bull trap scenario
A pseudonymous cryptocurrency trader known as “Bitcoin Jack,” who called the Bitcoin bottom in March, presented a potential bull trap scenario.
The term ‘bull trap’ refers to a technical scheme in which late buyers or long-time holders are trapped when the asset’s price drops.
If Bitcoin rejects from the $ 19,200 to $ 19,300 area, the trader has suggested that a potential pullback is likely. He noted that the $ 16,000 level would remain a compelling level of macroeconomic support.
Referring to Bitcoin Jack’s potential price trend projection, a trader known as “NekoZ” pointed out that such a trend is possible. he wrote:
“Seeing drops down to 12k is scary because my levels are consolidating between 16-18k. But yes, very possible, the resistors usually don’t break on the first try. Which is shown from the previous AP along the way. “
$ 20,000 is a major resistance level for Bitcoin
If Bitcoin exceeds $ 20,000, it would enter price discovery when looking for a new cap. Above $ 20,000, there is no historical data or evidence to suggest that BTC would cap at a certain price.
BTC could theoretically achieve various goals that many industry executives and analysts have shared over the past year. Most forecasts vary between $ 25,000 and $ 100,000 for the current cycle.
Therefore, sellers would have a significant interest in aggressively defending Bitcoin against the $ 20,000 breach.
The funding rate is extremely high
Sellers might find it convincing to increase their positions below $ 20,000 because of the high funding rates.
In major cryptocurrency exchanges, the funding rate of the Bitcoin perpetual exchange contract ranges from 0.05% to 0.1%. This means that buyers or holders of long contracts pay short sellers a large portion of their positions in the form of fees.
Since the funding rates are very positive, short sellers might find it convincing to aggressively sell the area under $ 20,000.
An active OTC market is a variable
Still, data on the chain shows that the over-the-counter (OTC) market is active. This generally suggests that whales, investors, and wealthy institutions could buy Bitcoin.
CryptoQuant CEO Ki Young Ju said that if some corrections could occur, $ 20,000 would likely be exceeded. Ki said:
“The OTC markets are still active. The $ BTC fund flow ratio hit an all-time low a few days ago. Only 3% of transactions are used for foreign exchange deposits / withdrawals on the network. We could have fixes, but I think it would end up breaking 20k. “
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