According to the latest news, Bitcoin increased as high as $29,292 before pulling back slightly to trade at $28,520. This suggests that the uptrend has resumed. Notably, the next level to watch on the upside is the psychological barrier at $30,000. Significantly, the world’s largest cryptocurrency sharply boosted in December, on track for its biggest monthly gain since 2019.
The dominant cryptocurrency has now quadrupled in value this year amid the global COVID-19 pandemic. The wider Bloomberg Galaxy Crypto Index tracking the largest digital currency is up approximately 280% as rival coins such as Ether have rallied.
Most retail traders expect Bitcoin price to increase to above $30,000 once the psychological barrier prevails. A popular trader on Twitter, Nuncya Bizniz, points out that the above $30,000 BTC price starts to look a bit overextended. Because currently, the 1.618 Fibonacci retracement is at $30,196.
Bitcoin price has rallied 64.9% since the beginning of December. Reaching the 1.618 Fib level could signal that a pullback is on the cards. However, the volume will be the primary indicator of where the price may travel.
Bitcoin price has increased by 302.6% for the year and is vastly outperforming gold and traditional markets like the Dow and S&P500. For the fourth quarter of the year, BTC had rallied by 168.32%. It secured the second-best quarterly performance since 2017 when Bitcoin boosted 210.13%.
Traders should weigh the risks before purchasing at the current levels
On-chain data suggest that high-net-worth individuals continue to purchase BTC after Christmas. Analysts at Santiment announced that smaller traders sold about $647 million worth of Bitcoin, and Bitcoin whales may have bought up this sum.
According to data, the large investors have been buying and holding their purchases during 2020, without aggressively booking profits. According to Glassnode analysts, this has induced the number of Bitcoin in circulation to decline by about 1 million.
This implies that out of the total available supply, 14.5 million Bitcoin are considered illiquid. Glassnode analysts say that this leaves only 4.2 million Bitcoin in constant circulation that is available for trading.
Meanwhile, that could further increase the demand and supply equation imbalance, boosting Bitcoin’s price higher.
However, every bull market has periodic corrections, and Bitcoin may also be due for one. Thus, traders should weigh the risks before purchasing at the current levels.
Although the growing moving averages suggest an advantage to the bulls, the relative strength index has climbed deep into overbought territory, implying that a correction could be around the corner.