Bitcoin Could Soon Stumble Into Resistance
Bitcoin (BTC), as of the time of writing this report, has begun its next leg higher. The cryptocurrency sits at $11,200, finding itself up by 5% in the past 24 hours after entering a lull in the $10,600 range.
Despite the continued bullish momentum, which many analysts have deemed a sign of “FOMO” influencing the crypto market, some believe that Bitcoin may soon run into some resistance. As pointed out by Nunya Bizniz, BTC is about to hit the ever-important 0.5 Fibonacci Retracement line, which sits just shy of $11,400. This key level acted as resistance in February and March of 2018 and as support in early-2018. Who’s to say that it won’t likely do the same this time around?
This isn’t the only sign that the region around $11,400 could act as a reversal point for Bitcoin. In a recent tweet, Josh Olszewicz, Brave New Coin analyst, pointed out that a logarithmic pitchfork pattern, which stretches back to 2016, suggests that BTC will likely find trouble breaking past $11,464.
A pitchfork, for those unaware, is a technical analysis method that uses parallel lines to determine trading ranges, resistances, and supports. The upper band of Olszewicz’s pitchfork, depicted below, has acted as resistance during 2016’s rallies and as a negative catalyst during November 2018, which pushed BTC to $3,000.
If history is of any indication, Bitcoin will have trouble breaking past this key trend line yet again.
Also, as Ethereum World News hinted at in a previous report, an analysis going by RedXBT noted that if you were to take the price action from June 2018 to December 2018, flip it, and then apply it to the current BTC chart, $11,500 will act as the short-term peak.
BitMEX Funding: A Harrowing Sign
This isn’t the only worrying sign for Bitcoin bulls right now. As pointed out by Bravado Trading’s lead analyst, Bitcoin Jack, the funding rate for longs — how much buyers of BTC futures need to pay — on BitMEX has reached 0.2965% for every eight hours of trading. While this may sound like a little fee, especially in a market as volatile as cryptocurrency, such high funding rates often precede drawdowns and short-term corrections in the Bitcoin price.
You see, on BitMEX, the use of margin results in buyers having to pay a leveraged fee. For instance, as Jack points, a 100x long’s margin can almost be totally wiped out in a day’s time at current funding rates, barring that BTC doesn’t continue to surge past $10,600. High funding rates for longs (and shorts for that matter) incentivize those holding their positions to sell or cover, thus moving the price of BTC on BitMEX, which should affect the broader cryptocurrency market.
Title Image Courtesy of Andre Francois Mckenzie Via Unsplash