The price of Bitcoin has reached $19,500 for the first time since December 2017, but there are crucial factors that could prevent BTC from setting a new all-time high
The price of Bitcoin (BTC) hit $19,500 on Coinbase, reaching its highest point since its peak in December 2017. Although the main cryptocurrency is close to a new record, there are some warning signs to consider.
Here are three potential reasons for a possible Bitcoin pullback near the $20,000 mark: a bull trap, superior resistance and an overcrowded derivatives market.
A potential bull trap scenario
A cryptocurrency trader known by the nickname „Bitcoin Jack,“ who predicted BTC’s low in March, outlined a potential bull trap scenario.
The term „bull trap“ refers to a technical pattern in which more recent buyers or long traders are trapped when the price of the asset falls.
If Bitcoin is rejected from the zone between $19,200 and $19,300, the trader suggested that the reaction will be pullback. Moving on, he added that the $16,000 level remains a compelling macro support level.
Commenting on the potential trend predicted by Bitcoin Jack, a trader known as „NekoZ“ highlighted the possibilities:
„Seeing corrections of up to $12,000 is scary as my levels indicate consolidation between $16,000 and $18,000. However very possible, resistance is usually not broken on the first attempt. Which we see in the price action plotted during the rise“.
The $20,000 is a decisive resistance for Bitcoin.
If Bitcoin exceeded the $20,000 level, it would enter a price discovery phase in search of a new high. Above $20,000, there are no historical data or elements indicating a ceiling for BTC at a given price.
In theory, Bitcoin Blueprint review could rise to the various targets shared by many experts and analysts throughout the year. Most forecasts for the current cycle are between $25,000 and $100,000.
Therefore, sellers will try to defend the $20,000 from the Bitcoin attack.
The funding rate is extremely high
Considerable funding rates could convince sellers to add positions under $20,000.
On major crypto currency exchanges, the funding rate for the perpetual swap contract on Bitcoin varies from 0.05% to 0.1%. This means that buyers or holders of long contracts are paying a large portion of their positions to short-sellers in the form of commissions.
Considering that the funding rates are clearly positive, short sellers could aggressively shorten the area just below $20,000.
Activity in the OTC market is a variable
On-chain data indicate that the over-the-counter (OTC) market is particularly active. Generally, this suggests a possible accumulation by whales, high net worth investors and institutions.
Ki Young Ju, the CEO of CryptoQuant, explained that despite some possible corrections, the $20,000 is likely to be exceeded:
„The OTC markets are still active. A few days ago, the $BTC Fund Flow Ratio reached its lowest level in three years. Only 3% of transactions on the network are used for deposits/withdrawals on and from exchanges. We might see some corrections, but I think we will eventually get the $20,000.“