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Less than a week ago, the price of bitcoin set a new all-time high at $ 19,920.53. However, the oldest cryptocurrency is still struggling to break above the $ 20,000 level.
The reason this milestone remains elusive, according to analysts and traders, is simple: There are too many sell orders very close to the $ 20,000 level because some bitcoin holders fear short-term sell-offs. This price is especially important as this is roughly where the market surpassed the high in late 2017 which saw the price of bitcoin quadruple in two months, only to collapse by 70% in the next two months. , its biggest price correction (at the time). .
“A standard [number] sellers are offering orders near the $ 20,000 level, which has undoubtedly created a strong level of resistance, ”said Simon Chen, executive director of investment and trading at Babel Finance, a crypto lender based in Hong Kong. “People are trying to sell at this level based on what happened during the 2017 bull market.”
For some, the similarities to 2017 are hard to ignore, especially the speed at which bitcoin has hit new record prices.
The $ 20,000 level “is like psychological warfare for many,” said Lingxiao Yang, chief operating officer of crypto quantification firm Trade Terminal. “It only took about a month for bitcoin to jump from about $ 14,000 to the new all-time high.”
But Yang also said that this emotional element has been largely reflected on the side of retail investors, as more institutions are in the “buy the plunge” mentality.
Market fundamentals are also weighing on bitcoin. Data from crypto-analysis site CryptoQuant indicates that major bitcoin holders, or whales, have not withdrawn bitcoin from exchanges.
“The fact that the whales are not retreating means that BTC is available for sale,” said Ki Young Jun, CEO of CryptoQuant in a tweet. “If the whales think the price will go up, they’ll take a lot of BTC out.”
According to Denis Vinokourov, head of research at Bequant, an increasing number of “wrapped” bitcoins have been “unwrapped” from decentralized cooling funding (DeFi), further evidence of increased selling pressure of nearly $ 20,000.
When the Ethereum-based DeFi space grabbed all the attention last summer, bitcoins were tokenized (or “wrapped”) on Ethereum. At one point, there were more bitcoins packaged on Ethereum than bitcoins created by bitcoin miners. To some extent, this may simply be because the price of bitcoin was doing reasonably well over the summer, more than doubling from its March 17 selling low of $ 3,867.09.
“It should be remembered that the initial strike was performed at an absolute value much [pricing] and taking profits and locking in assets in the future makes sense from a prudential standpoint, ”Vinokourov said.
Read more: Bitcoin price could reach $ 50,000 in 2021, Bloomberg analysts say
On the buyer side, new bitcoin investors may be “agnostic” about exactly where they buy between $ 15,000 and $ 20,000, according to Vishal Shah, founder of the Alpha5 derivatives exchange.
Buyers “aren’t concerned about the next 300 or 400 points, or even 1000 points,” Shah said. “It’s about the trajectory of things.”
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