Who remembers the great bear market of January 10th and 11th? Blink and you would have missed it. Bitcoin has bounced back with some swagger, leaving liquidated longs with the dreaded fomo. In fairness, we have just reached a critical juncture. The reaction to price around $38,000 is going to be key to the bullish theme. What can be said is that the reaction to the retracement from all-time highs has been impressive. The options market is echoing the sentiment. Purchases of calls are now dominating the flow.
With strike prices trading that demonstrate optimism for a continuation of the rally.
For me, the most interesting snippet of data is below. I mentioned recently that my upside target for Q1 had been adjusted to $54,000, a level that roughly coincides with a total market cap for Bitcoin of one trillion USD. Note the largest exposure to strike prices sits roughly at that level - it appears I'm not the only one with this metric as a target.
So where are the risks? We know the Bitcoin blockchain is healthy, with more new participants than ever, and the total supply of Stablecoins, a key metric when assessing pent up retail demand, is also busting off the chart.
So what external factors could come into play to spoil the next move higher?
Tomorrow is deadline day for Tether, the largest of all Stablecoins. The New York Attorney General is expecting Tether to hand over missing documentation regarding its $850m loan with Bitfinex. Failure to do so may create a ripple, and as we know, the SEC don't like ripple(s). If there was to be a catalyst to drive the SEC's focus towards Tether, tomorrow could be the day the storm starts...
Bitcoin has broken up through resistance at $35,868 and headed directly to our next level of interest at $38,180. The reaction to this move will be very telling for the days ahead. A push up from here will drive us back to $40,000 and target a new move higher to all-time highs.
Failure to move past $38,180 will open up the possibility of another quick move down as bulls become frustrated. $35,868 now becomes support, as we look for the market to continue to trade sideways and form a base.
Should $35,868 give way, then expect a return to $32,300.
It looks like crypto isn’t correlated to traditional markets, at least not during this past session.
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