Bullish momentum not enough to break the price resistance
The Bitcoin price resistance could be broken soon with increasing conversion of stablecoins to Bitcoin and larger futures premium.
February 21, 2023 - Bitcoin continued to test the US$25k price resistance in the last 24h, but the liquidity remained depressed due to traditional markets holiday in some countries. The US$25k price resistance could be broken soon with some indication of a bullish momentum building up with increasing conversion of stablecoins to Bitcoin and larger futures premium. We believe this resistance could be justified by the negative newsflow coming from macro and regulatory sources. Indeed, tomorrow the FOMC’s minutes will be released and it could be an event for Bitcoin to test that price level again.
Some of the ~US$4bn of stablecoins leaving exchanges in the past 30 days have flown into Bitcoin indicating a change of behavior in investors after the FTX collapse. Moreover, the Bitcoin futures premium is above 4% since last week, which means it could already be starting to cover trading costs and associated risks. This implies that traders are more optimistic about prices above US$24k as larger premiums represent a bullish signal. Also, this could indicate that the market is already pricing in the current macro and regulatory pressures against the crypto industry. Thus, the newsflow would have to get worse to trigger a major price correction in the markets, in our view.
There are more signs underscoring the bullish momentum for crypto. The Multiple Moving Average (MMA) indicator, also known as the Guppy, meaning that the shorter-term moving averages crossed above the longer-term moving averages, just flipped for the first time in the last 12 months. This anticipated moments in the past that cryptocurrencies moved significantly higher. However, there is some selling pressure building up as well, with thousands of sell orders piling up below US$25k price level. On top of that, some analysts believe that there could be a correction right after Bitcoin prices break that resistance. We believe that a negative reading from FOMC’s minutes tomorrow, and additional actions against the crypto industry from regulators, could increase the number of selling orders below US$25k, potentially making the oldest cryptocurrency to retest some support levels.
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