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Less than a week ago, the price of bitcoin set a new all-time high at $ 19,920.53. However, the older cryptocurrency is still struggling to break out of the $ 20,000 level.
The reason why the milestone remains elusive, according to analysts and traders, is simple: there are too many sell orders very close to the $ 20,000 level because some bitcoin holders are afraid of short-term sell-offs. That price is particularly significant because it’s roughly where the market peaked in the late 2017 rally which saw the price of bitcoin quadruple within two months, then plummet 70% within the next two months, its largest. (currently) price correction.
“A huge one [number] of sellers are offering orders near the $ 20,000 level, which has undoubtedly created a strong resistance level, “said Simon Chen, executive director of investment and trading at Babel Finance, the Hong-based lender. Kong. “People are trying to sell at this level based on what happened during the 2017 bull market.”
For some, the similarities to 2017 are hard to ignore, especially the speed at which bitcoin made new record prices.
The $ 20,000 level “is like psychological warfare for many,” said Lingxiao Yang, chief operating officer at cryptocurrency firm Trade Terminal. “It only took about a month for bitcoin to rise from around $ 14,000 to a new all-time high.”
But Yang also said that this emotional element has been largely reflected on the retail investor side, as more institutions are in the “buy the dip” mentality.
Market fundamentals are also weighing on bitcoin. Data from cryptographic analytics site CryptoQuant indicates that major bitcoin holders, or whales, have not withdrawn bitcoin from exchanges.
“The fact that the whales do not withdraw means that BTC is available for sale,” said Ki Young Jun, managing director of CryptoQuant in a tweet. “If the whales think the price will rise, they will withdraw a lot of BTC.”
According to Denis Vinokourov, head of research at Bequant, further evidence of the increase in selling pressure near $ 20,000 is that an increasing number of “wrapped” bitcoins have been “discarded” by decentralized finance (DeFi).
When the Ethereum-based DeFi space was garnering all the attention last summer, bitcoins were tokenized (or “wrapped”) on Ethereum. At one point there were more bitcoins wrapped around Ethereum than bitcoins created by bitcoin miners. To some extent, this may have been simply because bitcoin’s price was doing quite well over the summer, more than doubling from its March 17 low of $ 3,867.09.
“It is worth remembering that the initial minting was carried out at a much lower absolute value [pricing] levels and taking some profits and blocking assets in the future makes sense from a conservative standpoint, ”Vinokourov said.
Read more: Bitcoin’s price could reach $ 50,000 in 2021, Bloomberg analysts say
On the buying side, new bitcoin investors may be “agnostic” about exactly where they are buying in the range of $ 15,000 to 20,000, according to Vishal Shah, founder of the Alpha5 derivatives exchange.
Shoppers “aren’t worried about the next 300 or 400 points, or even 1,000 points,” Shah said. “It’s about the trajectory of things.”
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