According to Tuesday’s announcement, Square Inc. purchased Bitcoin valued at $170 million. The company stated it further commits to the cryptocurrency. Bitcoin continues to be a growing part of its business by using its Cash App for Bitcoin transactions.
Bitcoin euphoria started earlier this month when Elon Musk declared he had invested $1.5 billion in the cryptocurrency. Besides, he had been promoting BTC on his Twitter account.
The BTC price has increased by 30% this year. However, since Monday, it has dropped by 14%.
Bitcoin’s unpredictable price swings have been a subject of discussion. Janet Yellen, US Treasury Secretary, called it an extremely inefficient way to conduct transactions. Meanwhile, Gabriel Makhlouf from the European Central Bank compared it to Dutch Tulipmania.
Regulators and policymakers tell a different story.
This week, crypto exchange Bitfinex reached an $18.5 million settlement with New York’s Attorney General. It was accused of covering up losses and lying about reserves. They have been ignored in the face of superstar bulls like ARK or Tesla. They push grand narratives that capture the imagination.
Peter Garnry of Saxo Bank says that the “Tesla-Bitcoin-ARK connection” can produce a negative feedback loop across markets.
BTC purchases from Tesla and ARK mean crypto sell-offs have the potential to flow into the stock market. Recently, ARK’s flagship fund experienced its worst two-day retreat since September. Besides, Musk’s trolling tweets, calling out BTC prices for looking high, have sent traders to their screens.
What is the critical level for Bitcoin to watch out for?
The price of Bitcoin continues to waver between $48,000 and $51,000, unable to break above the resistance level of $ 51,600.
Suppose Bitcoin struggles to break above the $51,600 resistance zone in the short term. In that case, technical analysts say the probability of a correction increases.
According to Josh Olszewicz, a cryptocurrency trader and technical analyst, the $51,600 level is currently acting as a strong resistance level.
For Bitcoin to retest the all-time high of $58,000 and initiate a potential rally towards $62,000, it needs to break above $51,600.
Therefore, a rally beyond $51,600 is the clear point for any short-term bearish scenario for Bitcoin.
Failure to break out in the short term could lead to a bearish test of the lower support zones, which lie around $42,000.
The $42,000 support zone is a significant level because it marks the top of the previous rally. On January 8, the price of Bitcoin peaked at $42,085, registering a sharp correction afterward.