This Key Metric Suggests Bitcoin‘s Rally is Just Getting Started
Bitcoin’s intense rally throughout the past couple of days has allowed it to fly past multiple crucial resistance levels.
Bulls are now attempting to form the $11,000 price level into a strong base of support, but the selling pressure here appears to be ramping up.
One positive technical development seen overnight was the potent reaction to the $10,500 level.
This previously crucial macro resistance level has now been confirmed as a strong support level, as BTC dipped here overnight before seeing an instant influx of buying pressure that sent it up to over $11,000.
Now, one economist who focuses primarily on cryptocurrency is noting that Bitcoin is not showing any explicit signs that it has formed a macro top.
He points to the asset’s basis on BitMEX, which typically hits over 20% when the crypto enters overbought territory. At the moment, it is currently sitting at 12%.
He concludes that this means further upside could be imminent.
Bitcoin Flashes Signs of Strength Following $10,500 Retest
At the time of writing, Bitcoin is trading down marginally at its current price of $11,000. This is where it has been consolidating at in the time following its intense upswing.
Bulls were able to propel the cryptocurrency as high as $11,400 overnight, but the selling pressure it found here was quite significant.
It now appears that the mid-to-upper $11,000 region is a resistance level that won’t be surmounted unless bulls can garner greater support.
One positive sign to consider in the near-term is Bitcoin’s ability to confirm its previous resistance at $10,500 as a strong support level.
Bears tested this level overnight after they catalyzed a sharp selloff. Once this price level was touched by BTC, the digital asset instantly rebounded back up to $11,000.
This is a textbook support-resistance flip, which is a historically bullish sign that seems to indicate further upside could be right around the corner.
This Metric Signals BTC Hasn’t Yet Formed a Local High
The resistance within the mid-$11,000 region is quite intense, and it may take some time before bulls can shatter it.
Historically, BTC appears to top out when the basis hits over roughly 23%. This happened during the June 2019 top and the February 2020 top.
The economist notes that Bitcoin’s current basis sits at 12% – suggesting it has quite a way to rally before its uptrend losses steam.
“Spotting Major Bitcoin Tops: The June 2019 and February 2020 tops happened when the 3 month basis hit >23% on Bitmex & >24% on Deribit. On Jun/26 and Feb/13. This only happened one other time, Jun/23/2019, also right before a major correction. Bitmex’s 3 month basis is now 12%.”
Image Courtesy of Alex Krüger. Data via Skew.
This factor, coupled with Bitcoin’s support at $10,500, does seem to bode well for bulls.
Featured image from Shutterstock. Pricing data via TradingView.
Published at Tue, 28 Jul 2020 16:00:43 +0000