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The price of Bitcoin (BTC) dropped below $ 13,000 on October 28, shortly after hitting $ 13,850 at the peak of the day.. However, despite the 7% drop in 11 hours, market sentiment remains positive for three fundamental reasons.
First, Bitcoin is still where it was on October 27, just 24 hours ago. Second, BTC rose to $ 13,850, just below a multi-year resistance area at $ 13,873. In third place, a market-wide decline was expected due to declining stablecoin inflows on exchanges.
Bitcoin drops to where it was yesterday
For the past two days Bitcoin’s price jumped 8.5% from $ 13,783 to $ 13,850 on Coinbase. The move came after a one-month uptrend during which BTC rose from around $ 10,200 to $ 13,850.
Now, in high time frame charts, such as the daily chart, BTC’s price is above a short-term key moving average.
The recent Bitcoin pattern that follows every uptrend with a consolidation phase makes the ongoing rally sustainable.
Bitcoin daily price chart with funding rates. Source: TradingView.com
The strength of the spot market versus the crypto derivatives market also indicates that the uptrend is strong and healthy. A trader known as “Byzantine general” He said:
“A higher spot price and higher spot volume (in relative terms) are considered bullish because it means the rally is based on actual buying rather than degenerate derivative games.”
The $ 13,873 level is a multi-year resistance area
Bitcoin peaked at around $ 13,900 in July 2019 across major exchanges. As Cointelegraph reported, many traders have pointed to the $ 13,875 level as a near-term fundamental resistance area, partly for this reason.
If BTC continued to rise above $ 13,875 with no retracement, it would have caused the rally to overheat. Over the medium term, this would have increased the likelihood of a deep withdrawal, or as some chain analysts call it, a “candle from hell”.
The drop in the price of BTC coincided with the lack of stablecoin flow
Before Bitcoin’s short-term correction, CryptoQuant CEO, Ki-Young Ju, warned that the flow of stablecoins to exchanges was decreasing.
Stablecoin inflow is an accurate metric for measuring buyer demand because stablecoins, like Tether, account for a large portion of the volume of the cryptocurrency market.
According to CoinMarketCap, Tether’s daily volume exceeds $ 59 billion on major exchanges. Simply in terms of daily volume, Tether is the most used cryptocurrency in the global market. A few hours before the BTC crash happened, Ju tweeted:
“Fewer people deposit #stablecoin on cryptocurrency exchanges. The purchasing power of BTC is weakening in the short term (72h) ”.
The drop in stablecoin flow may have caused a steep drop for Bitcoin as buyers and sellers have been fighting intensely over the past week. Some miners and whales were selling, while new tickets continually compensated for the selling pressure.
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