The price of Bitcoin (BTC) broke above $11,000 at last, after 13 days within a tight range. But this time, the market dynamic is different because Ether (ETH) and most decentralized finance tokens are declining.
As Bitcoin rose to as high as $11,024 on Coinbase on Sept. 16, Ether, DeFi tokens and the majority of altcoins stayed stagnant. The contrasting performances between Bitcoin and the rest of the market make the ongoing BTC rally unique.
Some traders suggest that profits from Ether and DeFi tokens are being cycled into Bitcoin. Others have hinted that MicroStrategy’s bulk purchase of BTC led the spot prices of the dominant cryptocurrency to increase. MicroStrategy purchased an additional $175 million worth of BTC, which would add $7 billion to BTC’s market capitalization, as on-chain analyst Willy Woo noted. In the spot market, an order that exceeds $100 million could trigger a slippage of over 3%. Denis Vinokourov, head of research for digital asset exchange and brokerage firm Bequant, told Cointelegraph:
“Any immediate concerns over the sustainability of certain DeFi-based offerings are likely to provide a degree of support for Bitcoin. Thus, ETH and BTC may remain on a downward trend. However, that market appears to be overly fixated on DeFi and is ignoring positive developments that have come out of Ethereum over the last few days, which indicate the transition to 2.0 is very much on-track.”
Nonetheless, after the breakout of Bitcoin above $10,500, a level that has acted as a strong resistance, the sentiment of traders is mixed. Some traders believe that BTC will face rejection at the $11,000 level. Others foresee a continuous rally past the $11,000 mark, due to optimistic on-chain indicators.
The bullish case for Bitcoin
The bullish case for Bitcoin in the short term is a retest of the $11,000 resistance level without a steep rejection. Traders generally expect BTC to enter the $11,000–$11,300 resistance range. But given its historical relevance, technical analysts anticipate a strong pullback after achieving that price point.
If the price of Bitcoin remains relatively stable after rising above $11,000, that would amplify the bullish case for Bitcoin. In the medium term, there are two key levels for BTC: $13,000 and $16,000. The $13,000 level is a resistance area that Ark Invest CEO Cathie Wood previously discussed. The $16,000 level is one of the two currently open CME gaps, with the other being at $9,650.
During a podcast hosted by Ark Invest back in August, Wood said that getting through $13,000 would mean “very little” resistance to a new high. As there is low resistance between $13,000 and $20,000, the probability of a strong extended rally increases. But on the way to $13,000 stands two crucial resistance levels at $11,000 and $12,000.
According to Ki Young Ju, CEO of CryptoQuant, long-term on-chain indicators look healthy for Bitcoin. Citing the data, he said “It’s time, gents,” suggesting that a prolonged uptrend could spark. The on-chain indicators show that various fundamental data points hint at “buy” or “strong buy.”
Stablecoin and miner-related indicators, especially, signal an optimistic long-term trend for Bitcoin. It shows there is an abundance of capital on the sidelines stored in major stablecoins. Because stablecoins, such as Tether (USDT), account for a large portion of BTC’s daily volume, it shows that large amounts of capital are ready to enter the crypto market.
The bearish case for BTC in the near term
On Sept. 8, before the current Bitcoin price rally commenced, a crypto trader known as “Edward Morra” said there are two short-term CME gaps of $10,620 and $9,600 left, but which one will get filled first is uncertain. He hinted that the higher gap would likely fill first, and the other might follow:
“CME chart has a fresh gap 10620, usually most of the gaps (~90%) are filled within few days max, with exceptions (10%) that take a long time (like your $9,6 gap from July). So, it makes sense to assume higher gap at 10620 gets filled first here and then we see how it goes.”
In a follow-up analysis, Morra said: “Now let’s see if lower one gonna be filled.” Technically, a move up to the $11,000 resistance level and a drop back down to the $9,600 support level is a healthy minor correction for BTC.
Data from market analysis firm CryptoCompare shows that the average transaction value of Bitcoin has stabilized. Throughout August and September, active addresses have increased but have since stagnated. Active addresses directly reflect user activity on the Bitcoin blockchain network. The stagnation of the metric could increase the chances of a pullback in the near term. CryptoCompare analysts stated:
“Is this a sign that bigger, perhaps institutional, players are getting more involved in the space? Active addresses for #Bitcoin are stable at the moment, while #Ethereum’s momentum is dropping, possibly reflecting the recent pull back from the #DeFi space, following a very active period.”
Market variables
There are two variables that could have a direct effect on the price of Bitcoin. First, cryptocurrency trader Cantering Clark said profits from Ether and DeFi are likely moving back into Bitcoin. Whether that would redistribute to altcoins after a potential BTC rejection remains unclear.
Clark clarified that BTC would likely move back down to the $10,100 area in the near term. When it does, there is a chance that the profits that initially moved back into BTC could be redistributed to higher-risk assets, which include DeFi tokens. For now, Clark emphasized that both ETH and DeFi seem weak:
“Considering it looks like there is a rotation taking place at this point between assets, I think that regardless of where we move up to, that we end up coming back down to around 10.1 area. Just keeping it real. ETH and Defi seem a little cooked.”
Second, Liesl Eichholz, an analyst at Glassnode, said that the fundamentals of BTC are starting to drop off after the strong rally. Network growth, network activity, liquidity and market sentiment have all slightly declined. The four on-chain data points suggest that a pullback following a steep 4.5% rally within a seven-day period is likely. Despite the weakening fundamentals, Eichholz noted that the accumulation of BTC by HODLers continues to increase.