May 7, 2021

A Crypto Investor

Just another Crypto Guys Blog

$60K meets whale sellers: 5 things to watch in Bitcoin this week

Bitcoin (BTC) begins a new week riding high near record price levels — can it sustain the gains much longer?

After a roaring weekend, the largest cryptocurrency is seeing mixed results prior to Monday’s Wall Street open.

Cointelegraph takes a look at five factors which could serve to influence where BTC/USD heads in the coming days.

China growth counters lagging stocks

It’s a mixed picture for macro markets as the week gets underway, with no clear narrative dictating what the knock-on effect could be, if any, for risk assets.

While bond yields are troubling U.S. futures, on the other side of the world, Asia could barely be better as China reports almost inconceivable growth for the first months of 2021.

As Bloomberg notes, the data looks a lot tidier thanks to being compared to the same time last year, at which point China was in lockdown over Coronavirus. Both industrial output and retail sales beat targets of 32%, jumping by 35% and 33.8%, respectively.

Nonetheless, liquidity worries involving China’s central bank, the People’s Bank of China (PBoC), kept the overall mood in check.

“Since the start of this year, PBOC has net drained over 600 billion yuan in funds from the market in order to curb asset bubbles,” Xing Zhaopeng, an economist at Australia & New Zealand Banking Group, told Bloomberg.

A forecast rate increase from the U.S. Federal Reserve — something assumed to be all but guaranteed by some in the wake of the money printing exercises of this year and last — is likewise far from clear cut, according to the bank’s data.

“Economists expect Fed to hike by 50bps in 2023. But they also expect the US CenBank’s own forecast, which will publish at the next session on Wednesday, will show the median Fed official projecting rates staying on hold near zero throughout that year,” markets commentator Holger Zschaepitz summarized on Monday.

U.S. sends stimulus checks

For U.S. retail investors, meanwhile, the short term is dominated by one macro issue only: stimulus checks.

With the go-ahead from lawmakers, $1,400 direct payments are already in the mail as part of President Joe Biden’s $1.9 trillion stimulus plan, something already being called an “advertisement for Bitcoin.”

The move adds to the colossal U.S. debt mountain, already over $28 trillion even before its approval, and signals an ultimate return to inflation even as the Fed itself insists that the risk of such a scenario remains low.

Fed balance sheet chart. Source: Federal Reserve

Right now, however, Bitcoin proponents are only concerned about how much of the latest fiat windfall will find its way into the cryptocurrency’s ecosystem.

“Millions very happy Government passes $1.9 trillion stimulus bill. Who wouldn’t be happy with free money,” Robert Kiyosaki, author of the popular book, Rich Dad Poor Dadresponded over the weekend.

“Problem is free money makes poor and middle class poorer. Buy more gold silver and Bitcoin.”

Money has in fact been reaching Americans’ wallets since March 14, but the latest reports suggest that many will need to wait until at least Wednesday for their allocation.

Last year, with Bitcoin at a fraction of its current price and publicity itself much lower, a spike in buy-ins on Coinbase worth exactly the amount of the first stimulus check was still visible. This time around, conditions are much more favorable for a sudden jolt of investment from the retail sector.

Unlike 2020, analyst Lyn Alden notes, the timing of the third round of payments may make recipients feel more flush and allow them to opt for alternative investments.

“The third round of stimulus checks will go out when the income spike from the second round of checks is still pushing personal income above-trend,” Alden tweeted on Saturday.

“In contrast, the second round of checks didn’t go out until the first round of checks and unemployment benefits wore off.”

Whale pressure hits exchanges

Within Bitcoin, Monday is already proving to be a difficult day for traders.

After reaching all-time highs of $61,700 over the weekend, Bitcoin failed to maintain the bullish momentum, falling below the $60,000 mark during trading.

BTC/USD 1-hour candle chart (Bitstamp). Source: Tradingview

At the time of writing, the losses were not through yet, as BTC/USD headed towards $58,000, having retraced below the previous all-time high of $58,300 set last month.

A look at exchange orderbook data from Binance shows support lined up at $57,000, but should this break, levels closer to $50,000 are on the cards.

Binance buy and sell levels at March 15, 2021. Source: Material Indicators

The reason for the accelerating decline could be a familiar source. As on-chain analytics service CryptoQuant revealed on the day, exchange reserves are rising to the highest levels in a month, bucking a trend which as recently as Sunday continued to see traders withdraw BTC to cold storage.

Should appetites briefly return for selling, downward price pressure is a natural consequence. According to the data, Gemini appears to have seen a significant inflow, indicating that a professional trader, likely a whale, is primed to divest themselves of some or all of their holdings.

Bitcoin exchange balance vs. BTC/USD chart. Source: CryptoQuant/ Tradingview

“This 18k $BTC deposit is legit as it was a transaction between user deposit wallets and Gemini hot wallet,” CryptoQuant CEO Ki Young Ju commented on the event.

“All Exchanges Inflow Mean is skyrocketed due to this deposit. Don’t overleverage if you’re in a long position.”

As Cointelegraph reported, such a practise is far from uncommon, but given the amounts involved, sentiment can still be spooked as a result.

A whale sell-off likewise accompanied Bitcoin’s last major correction from all-time highs — 20% following its record $58,300 run in February.

Coins flow to strong hands

Contrasting the lower-timeframe wobble is data showing that the weekend conversely saw large amounts of Bitcoin taken off the market.

According to fellow monitoring resource Glassnode, Sunday in particular produced a large shift away from liquid supply as all-time highs failed to dent enthusiasm among investors.

Previously, the firm noted that those buying have a historical tendency to hold for the long term and not sell as a result of temporary market phenomena such as Bitcoin reaching a specific price point.

Bitcoin liquid supply change vs. BTC/USD chart. Source: Glassnode

Zooming out likewise shows that despite an uptick in BTC balances across exchanges on the day, the amount of Bitcoin available is still far lower than even half a year ago. Coinbase’s reserves, for example, are down by almost 20% since December alone.

Coinbase BTC balance chart. Source: Glassnode

The troubled path to $70,000 “destiny”

In a rebuff to the bulls, exchange funding rates have themselves seen their biggest spike since Feb. 23 — an indication that it may yet still pay to be short.

Bitcoin funding rates chart. Source: Bybt

The data compounds findings from analysts including Cointelegraph contributor filbfilb late last week, who argued that funding rate disparities across trading platforms took away from the overall narrative of a larger move soon to hit BTC markets.

“Given the macro context is so bullish for BTC right now, in our opinion, it pays to be patient and not get liquidated on low time frames when larger moves are likely just around the corner,” they wrote in an update.

Filbfilb himself is aiming for a local price top of $70,000 or more, describing it as Bitcoin’s “destiny,” but warns that the road to that goal will come with a lot more turbulence than that seen as Bitcoin cracked $50,000.

In comments on his Telegram trading channel, he referenced the impact of Tesla buying Bitcoin as an example of the straight-up trajectory that may not be replicated this time around.

“Just as a side note, I doubt this will break out like it did with the elon candle.. likely to be way more messy this time around,” he wrote.