Friday , February 26 2021

Why this chain analyst is short-term bearish when it comes to the price of Bitcoin

Ki Young Ju, CryptoQuant CEO and on-chain analyst, he says Bitcoin (BTC) shows a neutral downward trend in the short term at the moment.

There are two main indicators that have been useful in detecting trend changes in the current bullish cycle.

First, every time the Coinbase premium appeared, which means that BTC is trading higher on Coinbase than on Binance, for example, BTC experienced a bullish momentum. Second, Bitcoin’s momentum strengthened when it saw large outflows from Coinbase.

In recent days, however, neither of these two indicators has shown any power of permanence, as the metric fell into negative territory on 24 January.

BTC: Coinbase Premium Index (blue). Source: CryptoQuant

When will sentiment in the Bitcoin market improve again?

Most likely Bitcoin finds a renewed upward momentum if the premium on Coinbase appears constantly alongside large outflows from the exchange.

The combination of these two indicators would suggest that wealthy people are accumulating Bitcoin once again. Ki explained:

“I will maintain my bearish bias until there is a significant Coinbase premium and exchange exits. $ BTC needs US dollar cash inflows from institutional investors to start the next bullish race.”

The popular narrative around the recent rise of Bitcoin is that institutional investors and high net worth individuals are collecting BTC in every price drop.

In addition to the two indicators related to Coinbase, stablecoins deposits are another important metric that could indicate that a new rise is brewing.

Ki pointed out that stablecoins deposits in Exchanges are often a powerful on-chain signal for a rebound because it shows the entry of marginalized capital into the Digital Currency Exchange market.

Stablecoins deposits. Source: CryptoQuant

For example, when stablecoins deposits soared on January 22, BTC proceeded to rebound by around 6% in the next 24 hours. Who will say:

“This indicator is one of the most powerful on-chain signals with a pretty good hit rate. You can predict an instant rise in the short term, regardless of the general market trend. It’s the amount of stablecoins deposits in all Exchanges, which means investors are trying to send stablecoins to the Exchanges to buy digital currency. For example, if that value reaches 80, we can assume that 80 people are trying to deposit in an exchange in a single block, in 15 seconds. “

How low can BTC fall?

In the foreseeable future, if Bitcoin continues to move sideways, some traders expect BTC to fall as low as USD 27,000.

A pseudonymous trader known as “CJ” shared a potential scenario in which BTC could mark a ground near USD 26,000 or USD 27,000.

Bitcoin price chart with key lines. Source: and CJ

However, even in the worst case, analysts generally do not see the price of Bitcoin revisiting the area below USD 20,000. the trader he wrote:

“This channel could be precisely what prevents a new test of USD 20,000. According to this chart, the optimal point for a fall is between USD 23,000 and USD 27,000.”

While short-term on-chain indicators point to a slightly downward outlook, they do not point to the likelihood of a deeper correction.

Bitcoin falling back to around USD 20,000, the previous all-time high, would mean a 35% drop from current levels. Such an event seems unlikely, but traders need to be aware of a possible black swan event, such as a regulatory crackdown or a high-profile lawsuit against a major industry player.

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