Bitcoin Recovers 7% in a Week; Long-term Holders in Profit but Price Correction Looms
Summary:
In a week after a two-week low, Bitcoin's price has seen a 7% rise due to renewed inflows into Bitcoin ETFs. All long-term holders are now profitable, a trend that often leads to price corrections. There are increasing open interests in Bitcoin futures contracts suggesting potential for a price correction similar to the one experienced in March. Currently, Bitcoin faces resistance at $72,000, failure to break which could pull the price towards $68,000.
In a week after hitting a fortnight-low of around $56,550, Bitcoin (BTC) has risen over 7% to an approximate value of $71,560 on June 6. Nevertheless, due to certain on-chain and technical factors, a rapid correction might occur in the following days. The increase in BTC's value can be attributed to renewed interest and inflows into Bitcoin spot exchange-traded funds (ETF) exceeding $1.3 billion in the past two days.
Details from Glassnode, a market intelligence firm, indicate that all long-term traders of Bitcoin, have now flipped their unrealized losses into profit after BTC broke its November 2021 peak record. Up till June 4, when BTC was around $68,000, only 0.3% of long-haul holders, defined as those holding Bitcoin for over 155 days, were still in a loss position. The report reveals, "Currently, 0.3% of the supply is held by LTHs at a loss, while they also control over 85% of the profitable supply."
Most of these LTHs are said to have bought Bitcoin during the bull cycle of 2021 when the crypto reached its earlier record high of $69,000 in November 2021. Glassnode asserts the total volume of LTHs at a loss at that price was minimal, suggesting that all LTHs will remain profitable as long as Bitcoin stays above $69,000. According to Cointelegraph Markets Pro and TradingView data, Bitcoin traded at $71,138 at the news time, indicating all LTHs are now profitable. This high profitability is seen as a precursor to fear of missing out (FOMO), which is usually followed by or concurrent with price corrections, signaling potential pullbacks in Bitcoin's price in the next few days because investors might aim to book their profits.
Bitcoin futures contracts' increasing open interest warns of a potential price correction. In March, Bitcoin futures' open interest touched a peak of $36.31 billion, failing to break the $72,000 resistance, leading to a 22% correction over 25 days. Similarly, with the crypto's recent surge above $71,000, open interest rose by 12% within a week to reach an all-time high of $37.61 billion on June 6, according to CoinGlass data.
Investors are on the lookout for a pullback similar to that of March due to the high demand for Bitcoin futures contracts at present. High open interest sometimes signals extraordinary borrowing, leading to a possible increase in price swings, particularly if traders suddenly decide to change their strategies while holding multiple positions. It can also sway traders' overall sentiment, who perceive open interest as a signal when debating whether to retain or sell their crypto assets.
From a technical perspective, Bitcoin faced resistance at the $72,000 mark. Efforts to drive the price beyond this point in the recent past have been countered by supply congestion at this level. Unless Bitcoin can secure a decisive daily close above this mark, it may struggle. Failure to turn $72,000 into support might result in a drop in the crypto's price, with possible long position liquidations driving it down towards $68,000. CoinGlass data indicates high liquidity bids accumulating above $72,000, underlining the significance of resistance around this area.
Keep in mind that this piece does not provide investment advice or recommendations. All investments and trading actions carry risks. Therefore, readers are advised to conduct their own due diligence before making any financial decisions.
Published At
6/6/2024 7:34:55 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.