Bitcoin underwent some volatile days over the past week, facing its first geopolitical severe conflict throughout its relatively short lifetime.
The macro fear has yet to cool down, but judging by the last few days, bitcoin surprised the investor with a huge bounce back from $34K. This buying pressure was from FTX and Bitfinex exchanges and pushed the price to $40K, in correlation with Wall Street’s Thursday reversal (Nasdaq saw a 7% intraday surge).
The uncertainty and fear in the market on one side and the positive momentum in the price action on the other side are constructing a trading range between $34K and $40K.
Mid and Long Term
Bitcoin is now facing a new ‘challenge’ in its short life: A geopolitical crisis. The Russian – Ukraine conflict has triggered tremendous fear in all markets; therefore, the risk assets started to drop massively on Thursday’s morning EU timezone.
The price even broke below the $36K level for a couple of hours, yet bitcoin surprised its investors again. It seemed like the big players created a huge buy-pressure (mainly on Bitfinex), pushing the price above the $36K mark first, followed by a wild surge towards $40K resistance.
However, it could not go higher, seeing a green daily candle close (bullish) with two huge wicks to both sides. In conclusion, the $40k level and the 50-day moving average line are now the primary resistance areas.
If the price successfully breaks above these obstacles, the following critical level to watch would be the $46K zone and the 100-day moving average. On the other hand, a retest of the $36K support would be inevitable if the price gets rejected.
After bitcoin climbed up and hit its previous high at $44K in the middle of this month (February), it got rejected and started another bearish trend, causing the Open Interest to drop.
Last Thursday, bitcoin suffered significant price volatility, resulting in a large Long/Short liquidation. These liquidations are necessary for the market to temper the high leverage contracts employed in futures trading.
Following the price volatility, the Estimated Leverage Ratio and Open Interest have tumbled: Open Interest is already around multi-month lows, raising the possibility of bitcoin resuming a positive trend again. However, the market’s Estimated Leverage Ratio has not dropped as much as Open Interest, indicating that deleveraging phase might continue in the mid-term.
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